Stocks
Asian Markets Slide Amid Concerns Over Prolonged High Interest Rates
Asian markets experienced a decline on Tuesday, driven by concerns about interest rates following hawkish remarks made by a senior Federal Reserve official, signaling that the central bank was likely to maintain higher rates for an extended period.
Despite a significant drop in the past year, inflation in the United States continues to remain stubbornly above the Federal Reserve’s long-term target of two percent. This has led the majority of Fed officials to predict the necessity of another rate hike later this year.
Federal Reserve Vice Chair for Supervision, Michael Barr, conveyed his expectation at a conference in New York on Monday that interest rates would need to be kept at a “sufficiently restrictive level” for an extended period to control inflation. Barr’s comments align with the views of most of his colleagues, who recently lowered their expectations for the number of rate cuts in 2024, indicating an extended period of elevated rates.
Since March 2022, the Fed has increased its key lending rate 11 times, reaching a 22-year high. With inflation persistently exceeding its target, there is a consensus that “the Fed is gonna keep rates high and we are expecting higher rates for longer,” as noted by Xi Qiao, Managing Director for Wealth Management at UBS, in an interview with Bloomberg Television. However, this could potentially bring caution to the equity markets.
On Wall Street, trading ended with mixed results after a congressional deal was reached to avert an immediate US government shutdown. However, bond markets experienced a significant sell-off.
Stephen Innes from SPI Asset Management commented on the situation, stating, “Any ‘relief rally’ from the US government spending deal appears to have been short-lived as bond markets witnessed a deepening selloff, leading to rising yields across the curve.”
The yields on US Treasury bonds, especially the 10-year and 30-year bonds, remained notably high, reaching levels not seen in years. These Treasury bond yields are closely monitored as indicators of US interest rates.
Innes explained, “This yield surge reflects the market’s response to messaging from the Federal Reserve, indicating the central bank’s commitment to keeping borrowing costs elevated to combat inflation.”
Hong Kong led the decline in Asian equities on Tuesday, falling by nearly three percent as the market resumed trading following a holiday weekend. In contrast, the heavily indebted Chinese property giant, Evergrande, witnessed a stock price increase as it resumed trading in Hong Kong, days after its CEO was announced to be under criminal investigation.
Other Asian markets, including Tokyo, Sydney, Wellington, Singapore, Manila, and Bangkok, also saw declines, while Taipei and Jakarta remained relatively flat. Kuala Lumpur was the only market to register gains.
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.
