Asian shares slip as dollar firms on interest rate predictions
25 November 2021 - 08:36
byAlun John
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A man walks past screens displaying market data at CMC Markets in London, the UK. Picture: REUTERS/JOHN SIBLEY
Hong Kong — Asian shares wobbled lower on Thursday, hurt by the US dollar, which continued to march higher as investors bet on interest rates rising more quickly in the US than in other major economies such as Japan and the eurozone.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.18% to a six-week low, having posted a small decline in each of the past six trading sessions. Japan’s Nikkei rose 0.8%.
There were mild declines across the board. Australia shed 0.1%, Hong Kong lost 0.35%, and Chinese blue chips shed 0.3%.
Notably in Hong Kong, shares of Kaisa Group Holdings rose as much as 24% on their return to trading, after the embattled Chinese developer said it was offering bondholders an option to exchange existing bonds with new bonds having an extended maturity, to improve financial stability.
In broad terms, “when it comes to regional equities allocation, we’re watching the US dollar, which is making new highs, and that is a headwind for emerging market equities”, said Fook-Hien Yap, senior investment strategist at Standard Chartered Bank wealth management.
The dollar is trading near its highest in almost five years versus the Japanese currency at ¥115.3, and nearly 18 months to the euro, which was at $1.1206.
Supporting the greenback, several US Federal Reserve policymakers said they would be open to speeding up the tapering of the central bank’s bond-buying programme if the high rate of inflation held, and move more quickly to raise interest rates, minutes of the Fed’s November 2-3 policy meeting showed.
“The market is now pricing in more than two hikes next year, but we think that is overly aggressive. We are only looking for about one hike next year,” said Yap.
These expectations have pushed US treasury yields higher, albeit inconsistently, with benchmark 10-year notes last yielding 1.6427%, having risen as high as 1.6930% on Wednesday.
US treasuries will not trade on Thursday because of the Thanksgiving holiday. US stock markets will also be closed and will have a shortened session on Friday.
Overnight, Wall Street ended higher and is back testing record highs as tech stocks bounced back from a sell-off earlier this week.
In other central bank news, the Bank of Korea raised its policy interest rate by 25 basis points on Thursday, as widely expected, as concern about rising household debt and inflation offset uncertainty around a surge in Covid-19 cases.
Oil prices rose slightly after a turbulent few days in which the US said it would release millions of barrels of oil from strategic reserves in co-ordination with China, India, South Korea, Japan and Britain to try to cool oil prices after calls to Opec+ to pump more went unheeded. Opec+ is a grouping of Opec allies that includes countries such as Russia. However, investors questioned the programme’s effectiveness, leading to price gains.
Brent crude was last at $82.53 a barrel, up 0.33%, while US crude was at $7856, up 0.2%.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Asian shares slip as dollar firms on interest rate predictions
Hong Kong — Asian shares wobbled lower on Thursday, hurt by the US dollar, which continued to march higher as investors bet on interest rates rising more quickly in the US than in other major economies such as Japan and the eurozone.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.18% to a six-week low, having posted a small decline in each of the past six trading sessions. Japan’s Nikkei rose 0.8%.
There were mild declines across the board. Australia shed 0.1%, Hong Kong lost 0.35%, and Chinese blue chips shed 0.3%.
Notably in Hong Kong, shares of Kaisa Group Holdings rose as much as 24% on their return to trading, after the embattled Chinese developer said it was offering bondholders an option to exchange existing bonds with new bonds having an extended maturity, to improve financial stability.
In broad terms, “when it comes to regional equities allocation, we’re watching the US dollar, which is making new highs, and that is a headwind for emerging market equities”, said Fook-Hien Yap, senior investment strategist at Standard Chartered Bank wealth management.
The dollar is trading near its highest in almost five years versus the Japanese currency at ¥115.3, and nearly 18 months to the euro, which was at $1.1206.
Supporting the greenback, several US Federal Reserve policymakers said they would be open to speeding up the tapering of the central bank’s bond-buying programme if the high rate of inflation held, and move more quickly to raise interest rates, minutes of the Fed’s November 2-3 policy meeting showed.
“The market is now pricing in more than two hikes next year, but we think that is overly aggressive. We are only looking for about one hike next year,” said Yap.
These expectations have pushed US treasury yields higher, albeit inconsistently, with benchmark 10-year notes last yielding 1.6427%, having risen as high as 1.6930% on Wednesday.
US treasuries will not trade on Thursday because of the Thanksgiving holiday. US stock markets will also be closed and will have a shortened session on Friday.
Overnight, Wall Street ended higher and is back testing record highs as tech stocks bounced back from a sell-off earlier this week.
In other central bank news, the Bank of Korea raised its policy interest rate by 25 basis points on Thursday, as widely expected, as concern about rising household debt and inflation offset uncertainty around a surge in Covid-19 cases.
Oil prices rose slightly after a turbulent few days in which the US said it would release millions of barrels of oil from strategic reserves in co-ordination with China, India, South Korea, Japan and Britain to try to cool oil prices after calls to Opec+ to pump more went unheeded. Opec+ is a grouping of Opec allies that includes countries such as Russia. However, investors questioned the programme’s effectiveness, leading to price gains.
Brent crude was last at $82.53 a barrel, up 0.33%, while US crude was at $7856, up 0.2%.
Spot gold edged 0.17% higher to $1,791/oz.
Reuters
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