SHANGHAI, Sept 24 — Asian shares fell today following a slump on Wall Street overnight, as a series of warnings from US Federal Reserve officials underscored investor worries over the resilience of the economic recovery.
US Federal Reserve Vice Chair Richard Clarida said yesterday that the US economy remains in a “deep hole” of joblessness and weak demand, and called for more fiscal stimulus, noting that policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2 per cent.
Cleveland Federal Reserve Bank President Loretta Mester echoed Clarida, saying that the US remains in a “deep hole, regardless of the comeback we’ve seen.”
MSCI’s broadest index of Asia-Pacific shares outside Japan tumbled 1.35 per cent in the morning session on broad losses across the region.
Chinese blue-chips dropped 1.09 per cent, Hong Kong’s Hang Seng fell 1.72 per cent, Seoul’s KOSPI sank 1.73 per cent and Australian shares were 1.18 per cent lower.
Japan’s Nikkei fell 0.74 per cent.
“Have we overpriced the rebound in the economy? After the stern warning from Clarida, I say we have,” said Stephen Innes, chief global markets strategist at AXI.
“I think the market was interpreting a bounce from the bottom as a cyclical recovery, but I don’t think we’re there yet. I still think there’s a lot of blood on the street, especially on Main Street.”
US stocks fell yesterday after data showed business activity slowed in September, with gains at factories more than offset by a retreat at services industries.
Investors now await weekly data due later today, which is expected to show US jobless claims fell slightly but remained elevated, indicating the world’s largest economy is far from recovering.
While Clarida and other Fed officials have called for more fiscal assistance in boosting the economy, analysts say immediate support is unlikely with the US Congress locked in a stalemate.
Additionally, a second wave of coronavirus infections in Europe threatened the economic recovery in that region pushing equities lower and propping up the safe-haven dollar.
Yesterday, the Dow Jones Industrial Average fell 1.92 per cent, the S&P 500 lost 2.37 per cent and the Nasdaq Composite dropped 3.02 per cent.
In the currency market, the dollar eased from two-month highs touched yesterday. The dollar index, which measures the greenback against a basket of peers, was a touch lower at 94.348, but edged up against the yen to 105.41.
The euro ticked up to buy US$1.1664.
“A stronger USD remains a significant headwind for commodity markets, with investor appetite waning,” ANZ analysts said in a note.
Spot gold, which hit a two-month low early in the Asian day on the stronger greenback, was flat at US$1,863.61 per ounce by mid-morning in Asia.
Oil prices fell amid uncertainty about demand due to pandemic-related travel restrictions.
Brent crude dropped 0.89 per cent to US$41.40 a barrel and US West Texas Intermediate crude was 1.15 per cent lower at US$39.48 a barrel.
US Treasury yields were little changed, with the 10-year yielding 0.6757 per cent from 0.676 per cent yesterday, and the 30-year yield at 1.4168 per cent from 1.425 per cent. — Reuters
