Asia: Volatility returns as slowdown fears weigh on equities
Asian stocks got the week off to a bad start, as renewed concerns over a global slowdown saw most markets close lower across the region.
China’s Shanghai Composite Index reversed Friday’s losses and gained 1.89% but Hong Kong’s Hang Seng Index declined 0.75%.
Markets were under pressure at the end of last week, after the US Federal Reserve said on Thursday that it opted against raising interest rates as it worried about a potential slowdown in the global economy, sparking a fresh bout of volatility.
“It seems though that the Fed has not received the backing of investors as it both calls into question the strength of the US and global economy and leaves a cloud of uncertainty hanging over the markets,” said Oanda’s senior market analyst Craig Erlam.
“Far too much is made of this first Fed rate hike but it seems that the longer it is put off, the more anxious investors are going to feel about it.”
Worries over an economic downturn were not quelled by the European Central Bank, which announced on Saturday it is ready to expand its stimulus measures to ensure inflation returns near its 2% target.
With the Fed singling out China-driven volatility in its statement as one of the crucial factors in its decision to hold interest rates, the country’s economy will be even more closely monitored.
“Weighing concerns about the slowdown in China and any ripple out effect, the strength of the US dollar adding to a deflationary environment, they [the Fed] couldn’t really do anything else, given virtually every other central bank in the world is in full easing mode,” said CMC Markets’ chief market analyst Michael Hewson.
Markets should get a further insight later this week into the Chinese economy with the release of preliminary Caixin Manufacturing PMI data for September on Wednesday.
Elsewhere, Japanese markets were closed for a holiday and will reopen on Thursday, while South Korea’s Kospi shed 1.57% and Australia’s S&P/ASX 200 fell 2.02%, while the Australian dollar lost 0.30% against its American counterpart.
Currencies in emerging markets were also under pressure, with the Malaysian ringgit and the Indonesian rupiah falling 0.8% and 0.5% respectively against the dollar.