Stocks
Asian Stock Markets Slump as Investors Brace for Prolonged Rate Hikes
Global financial markets took a sharp nosedive on Tuesday as investors grew increasingly anxious about the possibility of another interest rate hike in the United States. Concerns were compounded by worries that these elevated rates might persist to combat stubbornly high inflation.
Despite a brief rebound on Wall Street, early Asian trading saw the dollar strengthen even further, driven by a surge in US Treasury yields to their highest levels in 16 years. This development reignited fears that the world’s largest economy could slip into a recession.
Adding to the uncertainty, lawmakers in Washington struggled to reach an agreement on spending, raising the specter of a government shutdown. This political deadlock prompted warnings that it could negatively impact the US credit rating. The recent surge in oil prices further fueled concerns that central banks’ efforts to curb inflation might be derailed after over a year of tightening measures.
Last week, the US Federal Reserve indicated that it could raise borrowing costs once again before the year’s end. This announcement dealt a blow to many market participants who had hoped that the interest rate hike in July would be the last for a while. Additionally, policymakers hinted that rates might need to remain at their highest levels in over two decades for an extended period.
Market analysts from the BlackRock Investment Institute believe that “rates will stay high” and that Treasury yields could continue to climb. They suggest that rising long-term bond yields reflect the market’s adjustment to increased macro and market volatility. The prevailing sentiment, as noted by National Australia Bank’s Tapas Strickland, is that rates will remain elevated for an extended period, reflecting the Federal Reserve’s stance.
In early Asian trading, major stock markets including Tokyo, Hong Kong, Shanghai, Seoul, Singapore, Sydney, Taipei, and Wellington all experienced declines, reflecting the uncertainty gripping investors. The situation in China’s property sector also raised concerns, with the troubled developer Evergrande announcing that it had missed an onshore bond repayment.
On the currency front, the dollar remained near 11-month highs against the yen, prompting Japanese authorities to express their willingness to intervene if the dollar’s ascent becomes excessive. However, analysts do not anticipate a significant strengthening of the yen, given the Bank of Japan’s commitment to its ultra-loose monetary policy.
The ongoing political standoff in Washington, where hardline Republicans in the House of Representatives have blocked key spending bills, is causing unease among investors. If an agreement is not reached by the weekend, it could lead to a government shutdown, a scenario that Moody’s warns would have negative implications for the US’s top-tier credit rating.
Reviewing the U.S. Stock Markets, the Nasdaq Composite, recorded a decent loss of 1,023 points, reaching a closing value of 16,690 points by the end of the week. Similarly, the S&P 500 index showed a positive trend, losing 240 points to settle at 5,408 points. Meanwhile, DJIA Index experienced a notable hike, adding 1,218 points during the week and concluding at 40,345 points after a week of gaining.
In contrast, Russell 3000 Index saw a loss in week performance, with a slight drop of 141 point to reach 3,077 points by the end of the week.
Moving to Russell 2000 Index, demonstrated a notable lost of 126 points, ending the week at 2,091 points.
In the Outgoing week, the European stock market displayed a mixed performance.
Here is the data on the weekly performance of the European Stock Market, The STOXX Europe 600 index, which is considered a leading benchmark for the European market and covers approximately 90 percent of the market capitalization across 17 countries, reported a loss of 18.49 points to close at 506.56.
The United Kingdom’s FTSE 100, one of the most widely followed indices in Europe, also showed a significant drop, losing 195 points or finishing the session at 8,181.
In Germany, the DAX 30 index, added by 605 points to reach 18,301, while France’s CAC 40 decreased by 278 points to stop at 7,352 at the end of the trading day.
Italy’s FTSE MIB, which covers the top 40 stocks traded on the Milan Stock Exchange, decreased by 1,081 points to 33,291. However, Spain’s IBEX 35, lost by 228 points, to close at 11,173.
A review of South Asian stock markets shows that India’s Bombay Stock Exchange (BSE) index BSE Sensex has lost 1,182 points during the week. At the end of the week, the index stood at 82,365 points. On the other hand, the Nifty-50 index of the country’s National Stock Exchange dropped by 383 points last week. At the end of the week, the index stood at 24,852 points.
Pakistan Stock Exchange Index ‘KSE 100’, added 459 points last week. After a week of losing, the index settled at 79,002 points.
On the other hand, The Sri Lankan stock market index loss, and the Colombo Stock Exchange index ‘ASPI’ decreased by 94 points in a week. After a week the index settled at 10,775 points.
Bhutan’s stock market index ‘BSI’ dropped by 9 points hence the index stood at 1,500 points throughout the whole week. Nepal’s ‘NEPSE’ lost 22 points, therefore the index stands at 2,727 points.
Hence Dhaka Stock Exchange: The benchmark index ‘DSEX’ lost by 75.77 points or 1.31 percent, in the outgoing week. At the end of the week, the index stands at 5,728 points.
