TOKYO (Reuters) – Asian stocks fell on Monday as concerns over China’s real estate sector and inflation concerns offset bullish US data and positive news on new drugs to fight the coronavirus.
Trading in heavily indebted China Evergrande shares has been suspended after missing a key interest payment on its offshore debt for the second time last week.
âThe biggest problem is not an Evergrande fault but the environment that led to its downfall. The authorities regulate home loans and loans to real estate companies. The markets are already looking for an next Evergrande, âsaid Kazutaka Kubo, senior economist at Okasan Securities.
“There is a growing risk that the woes of Evergrande will spill over to the entire Chinese real estate industry.”
The largest MSCI index of Asia-Pacific stocks excluding Japan fell 0.3%. The index marked its first quarterly decline in six quarters.
Hong Kong led the decline with a 1.9% drop in the Hang Seng Index. Japan’s Nikkei erased earlier gains to fall 1.4% to a one-month low of 28,375.
Mainland Chinese markets will be closed until Thursday for the National Day while South Korean markets were also closed on Monday.
MSCI’s largest global equity index, ACWI, slipped 0.1% to 711.92, not far from a three-month low hit Friday at 705.27.
Investor sentiment improved on Friday after Merck & Co said experimental oral antiviral therapy could halve the chances of dying or being hospitalized for those most at risk of severe COVID-19 .
A slew of US economic data released on Friday also showed increased consumer spending and faster factory activity, but also high inflation.
Data released on Friday also showed eurozone inflation topped a 13-year high last month and looks likely to climb even higher.
Investors fear global inflation may persist longer than expected, given the continued rise in commodity prices and continued supply disruptions in many parts of the world, despite the insistence of the Fed chairman , Jerome Powell, on the fact that high inflation is transient.
The core US PCE price index, the Federal Reserve’s preferred inflation measure for its flexible 2% target, rose 3.6% in August from a year earlier, its largest increase in three decades and equaling the gain of July.
âWhile Powell has stuck to his scenario that inflation will be transient, he has also recently started to cover his comments, which has led investors to believe that he, too, is worried about inflation,â said Norihiro Fujito, Chief Investment Strategist at Mitsubishi UFJ Morgan. Stanley Securities.
Expectations that high inflation could prompt the Federal Reserve to push forward its timetable for tightening monetary policy boosted US bond yields last week.
But yields moved away from the multi-month peaks of last week, with month-end buying supporting bond prices.
The 10-year US Treasury yield stood at 1.460%, following Tuesday’s three-month high of 1.567%.
Falling US yields also weighed on the dollar in the currency market. The euro rebounded to $ 1.1608, from Thursday’s 14-month low of $ 1.1563.
The US currency fell to 111.00 yen, remaining below Thursday’s 1 1/2 year high of 112.08 yen.
Oil prices have remained elevated, with Brent futures remaining just short of a three-year peak reached late last month, based on expectations from oil-producing countries that will increase the supply of oil. on a regular basis when they meet on Monday.
Brent futures were trading at $ 78.99 per barrel, down 0.3% at the start of trading.
Editing by Ana Nicolaci da Costa