Stocks in Asia dropped on September 7 as investors were unimpressed by robust U.S. economic statistics and the yuan was hit by weaker-than-expected Chinese trade figures.
The expansion of China’s exports slowed in August due to a number of factors, including rising prices in a local manner and abroad, new COVID restrictions, and heatwaves that hampered manufacturing. Data released by the U.S. government in July indicated that for every one person who was jobless, there were two people working. This seemed to back up claims that the economy could handle more rate hikes to stop inflation, which has reached levels not seen in decades. There have been rumblings of a slowdown in economic growth, and some investors anticipated this would prompt the Federal Reserve to ease policy.
Oanda’s Edward Moya said in a note that the employment report “reinforced the case for the Fed to adhere to an aggressive approach.”
Although a Reuters poll predicted a 12.8% year-over-year increase in Chinese exports in August, actual export growth was just 7.1%. Offshore, the Chinese yuan fell to 6.99.
Both the Nikkei 225 and the Topix in Japan ended the day down, at 27,430.3 and 1,915.65, respectively. The Shanghai Composite recovered from its early losses to close marginally higher, while the Shenzhen Component gained 0.41 percent. The Kospi in South Korea ended the day down at 2,376.46, while the S&P/ASX 200 in Australia finished down by 1.42% at 6,729.3.
Why Do Asian Stocks Drop In Value?
Even though there was worry over new COVID limits in major mainland cities, the benchmark Chinese market index showed a modest response, increasing 0.02% and recouping previous losses.
Following Wall Street’s declines, the Nikkei average of Japanese stocks was down 0.95 percent early on, while MSCI’s broadest index of Asia-Pacific equities outside of Japan was down 1.6 percent. U.S. 10-year treasury rates hit a new high of 3.365% on Wednesday, the worst day for fixed-income markets since June 16. The value of the yen against the dollar, dropped to a new 24-year low of 143.57, following a pattern of decline that has occurred in tandem with rising U.S. rates. It is also worth noting that for the second day in a row, the yuan (Chinese currency), as shown on this page, has fallen below the psychologically important 7 barrier, falling to 7.0080 per dollar, a level not seen in over two years. This was the result of the Fed’s interest rate hikes. In an attempt to boost economic growth, which had been severely impeded by lockdowns due to COVID, the People’s Bank of China cut the repo rate and expedited cash injections into the economy on September 19.
On July 31st, the United States government revealed that there were 11.2 million unfilled employment openings. That’s an increase from June’s 11 million and the result of an upward revision for the previous month’s count.
Technology companies’ stock prices fell more than most. The stock price of chipmaker Nvidia dropped 2.1%.
Prices for a barrel of U.S. crude oil rose from 89 cents in electronic trading on the New York Mercantile Exchange, to $92.53. On Tuesday, the contract dropped by $5.37, reaching a low of $91.64. Brent oil, a commodity used to set prices in international trade, increased by 93 cents, reaching $98.77 a barrel in London.
According to Pakistan’s Finance Minister Miftah Ismail, the nation is experiencing the worst floods in its history because of the climate catastrophe. This is in part due to the acts of the developed world.
Ismail adds his voice to many in the flood-ravaged nation who argue that climate change has had a disproportionately negative impact on their region despite the fact that they produce relatively fewer greenhouse gasses.
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After last week’s weaker-than-anticipated employment statistics sparked expectations that the Fed may contemplate a soft landing with fewer rate rises, “that optimism very well gone again” on the fresh batch of results, he said.
Wong said that “investors we spoke to… have lost quite a bit of faith in the (stock) market,” and that as a result, there has been a resurgence of interest in high-quality bonds among those looking to generate income via coupon payments.
The S&P/ASX 200 Index in Australia fell 1.29 percent. Despite dramatically increased interest rates and cost-of-living pressures, economic growth picked up steam in the second quarter of this year.
Hong Kong stocks dropped 1.35 percent, with the key technology index down 1.9 percent. After a complete lockdown in Chengdu, in the southwest of the country, the benchmark index in China dipped by 0.11% on worries about further COVID limitations on big mainland cities such as Guiyang.
At the same time that it bolstered the consensus that the economy was not in a recession, it contributed to wagers that the Federal Reserve would not lower the rate at which it was increasing interest rates.