Asian stocks fall on strong US economic data, struggling yuan

Hong Kong — Asian stocks fell on Wednesday as investors took no cheer from strong US economic data and as weaker-than-expected Chinese trade numbers pressed the yuan lower.

China’s exports growth slowed in August, as surging inflation crimped overseas demand and fresh Covid-19 curbs and heatwaves disrupted production, reviving downside risks for the economy.

Exports were up 7.1% in August on a year earlier, slowing from an 18.0% gain seen in July, according to official customs data.

The yuan further weakened, depreciating 0.36% to 6.98 per dollar and approaching the 7-per-dollar mark. Chinese authorities have signalled concerns about the currency’s strong declines.

However, China’s stock benchmark gave a muted reaction to the news, rising 0.02% and recovering earlier losses despite concerns about fresh Covid-19 restrictions in large mainland cities.

Tracking Wall Street’s losses, MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 1.6% in morning trade and Japan’s benchmark Nikkei average was down 0.95%.

Fixed-income markets came under heavy pressure, with US 10-year treasury yields rising to 3.365% on Wednesday, the highest since June 16. The Japanese yen, which has tended to weaken as US yields have risen, hit a fresh 24-year low of 143.57 per dollar.

Data overnight showed the US services industry picking up in August for the second straight month amid stronger orders growth and employment.

While that reinforced views the economy was not in recession, it also added to expectations the US central bank would not slow the pace of interest rate hikes any time soon.

“The good news for the real economy has now become bad news for the market — both for the bond and the stock market,” said Redmond Wong, Hong Kong-based market strategist of Greater China at Saxo Capital Markets.

Weaker-than-expected US jobs data last week ignited hopes the Fed might consider a soft landing with slower rate hikes, but “that hope pretty much vanished again” on the new set of numbers, he added.

“Investors we talked to … have lost quite a bit of confidence in the (stock) market,” Wong said, adding they showed renewed interest in high-grade bonds to gain cash flow from coupons.

Australia’s S&P/ASX 200 index lost 1.34%. Economic growth in Australia in the second quarter picked up speed, offering hope that activity could weather sharply higher interest rates and cost-of-living pressures.

Shares in Hong Kong fell 1.73%, dragged down by the main tech index, which extended losses to 2.33% on fresh regulatory warnings.

Overnight, the US Securities and Exchange Commission (SEC) cautioned that US accounting firms risked breaching US rules if they agreed to lead audits of New York-listed Chinese and Hong Kong companies looking to avoid potential trading bans.

E-mini futures for the S&P 500 fell 0.51%, while the pan-region Euro Stoxx 50 futures were down 1.29%.

Other Asian currencies tumbled against the dollar due to the surge in US bond yields.

In energy markets, crude oil prices stumbled on weaker consumption forecast. US crude fell 1.7% to $85.4 a barrel and Brent was at $91.7, down 1.3% on the day.

Spot gold fell 0.5% to $1,693 an ounce.

Reuters