Hong Kong: Asian shares fell on Monday and looked set
for their worst monthly performance in three years after top Federal
Reserve officials kept the door open for an interest rate hike in
September and Chinese stock markets took a fresh tumble.
Global markets are bracing for Chinese data on Tuesday which is expected
to show the world's second-largest economy is continuing to lose
momentum.
A Reuters poll showed China's official factory sector activity likely fell to a 3-year low.
U.S. business surveys, factory orders, trade data and nonfarm payrolls
will also be released this week, keeping investors on edge after one of
the wildest trading weeks of the year.
MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.8 per
cent and is set to fall 10 per cent this month, its worst monthly drop
since May 2012.
Japan's Nikkei was down more than 1 per cent and South Korea's Kospi shed 0.6 per cent. Australian shares lost 1.2 per cent.
Selling intensified as China markets extended declines. By midmorning,
Shanghai stocks, the epicentre of this month's whip-saw action, were
down 3 per cent. They have plunged more than 40 per cent since mid-June.
U.S. stock futures shed 1 per cent, pointing to weakness on Wall Street later in the day.
"Overall sentiment towards emerging markets continue to be quite
cautious," said Frances Cheung, Asia strategist at Societe Generale in
Hong Kong.
"Unless we see a decisive trend forward in the trajectory of U.S.
interest rates, investors will continue to be wary of emerging market
assets."
U.S. Federal Reserve Vice Chairman Stanley Fischer, speaking at the
central bank' conference in Wyoming, said recent volatility in global
markets could ease and possibly pave the way for a rate hike.
"The release of U.S. ADP employment on Wednesday and non-farm payrolls
on Friday will be key in analysing the quantum of a September rate
hike," Angus Nicholson, market analyst at trading services provider IG
in Melbourne, wrote in a note to clients.
Prospects of higher interest rates and returns in the United States
combined with China's slowdown have diminished the appeal of emerging
markets as investors have dumped riskier assets.
Investors sold $5.9 billion of emerging market assets between Aug 20-26,
a sharp increase from $1.5 billion the week earlier, according to
Nomura fund flows data.
Credit markets, often a harbinger of things to come for equities, spelt further pain in store for emerging markets.
An index for Asian high-yield credit has fallen sharply compared to a
relatively steady performance in the investment grade index, according
to Thomson Reuters data.
The dollar eased 0.4 per cent to 121.15 yen after rising to the week's
high of 121.76 on Friday following the Fed officials' comments that kept
prospects of a September hike alive.
The euro was up 0.5 per cent at $1.12405 after touching an eight-day low of $1.1156 on Friday.
The market will watch Thursday's policy meeting to see if the European
Central Bank will be inclined to ease monetary policy further in the
wake of the recent global markets turmoil, though no imminent change is
expected.
U.S. crude oil prices dipped early on Monday as their biggest two-day surge in quarter of a century ran its course.
U.S. crude was down 0.8 per cent at $44.86 a barrel after jumping more
than 6 per cent on Friday on frenetic short-covering fuelled by violence
in Yemen, a storm in the Gulf of Mexico and refinery outages.
The contract was still down nearly 5 per cent on the month, when it hit a
6-1/2-year low last week in the wake of China-led global growth fears.
