Stocks slide and dollar firm ahead of Jackson Hole conference

  • Fed sticks to hawkish tone – analysts
  • U.S. Terminal Rate Expectations Rise, Dollar Gains
  • New swings hit property stocks in China

SINGAPORE, Aug 24 (Reuters) – Asian stock markets fell for an eighth consecutive session on Wednesday as investors worried about the scale of the problems in China’s property sector and braced for a hawkish message from the Federal Reserve at the symposium in Jackson Hole this week.

MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 0.5%, while the Japanese Nikkei (.N225) fell by the same margin. The US dollar hid just below the highs of most major currencies and near a 20-year high for the euro.

Wall Street stabilized on Tuesday after two days of heavy losses as soft U.S. data tempered rate hike concerns, but S&P 500 futures were cut 0.2% in Asia, while FTSE futures and European futures also fell slightly.

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Late Tuesday, Minneapolis Fed Chairman Neel Kashkari was the latest official to reiterate the Fed’s focus on controlling inflation above all else, and traders are expecting something similar from the part of Fed Chairman Jerome Powell speaking from Wyoming on Friday.

“It might be wiser for (Powell) to come in with a caveat, ‘Right now all we care about is getting inflation down,'” the ING economist said. Rob Carnell.

“Bond yields would rise a bit more, having the desired effect…and then you can start to relax (later).”

Traders have raised their expectations for where the fed funds rate could peak, with current prices pointing to around 3.7% in mid-2023.

However, a recent round of weaker economic news in the US has seen short-term Treasury yields stabilize after climbing throughout August.

US services and manufacturing surveys disappointed on Tuesday and July new home sales fell to a 6½-year low. Read more

Two-year yields held steady at 3.307% on Wednesday and 10-year yields fell 2 basis points (bps) to 3.0332%.


The US dollar, which was supported by higher interest rate expectations, also benefited from poor comparative prospects in other parts of the world.

In Europe, benchmark gas prices have tripled in just over two months, and a winter of unreliable energy supplies from Russia looms.

Expected damage to growth and rising inflation are causing the euro to languish. On Wednesday, it bought $0.9956 after falling as low as $0.99005 on Tuesday.

In China, meanwhile, real estate stocks tumbled, with earnings again serving as a reminder of the deep hole developers find themselves in without access to easy credit. An index of builders listed in Hong Kong (.HSCIPC) fell 2.5% to its lowest level in 10 years.

“People are always trying to understand the full extent of the adverse effects as they have multiple repercussions,” said Samuel Siew, Market Specialist at CGS-CIMB in Singapore.

“It’s still very difficult to really gauge the full gravity of the situation. That’s what the markets are trying to decipher, and whether the continued support is enough.”

The Hang Seng Index (.HSI) fell 1.3% on Wednesday, as did the Shanghai Composite (.SSEC)while the yuan fell sharply despite reports from state media saying there is no basis for a long-term decline.

Dollar strength elsewhere pushed the Aussie and Kiwi lower, although the yen edged higher to 136.48 to the dollar.

Brent crude futures fell back below $100 a barrel – the latest contract was down 43 cents at $99.79 – amid some doubts over talk of Saudi supply cuts. U.S. crude futures fell 30 cents a barrel to $93.44.

Spot gold was flat at $1,747 an ounce. Bitcoin still bears the scars of a sudden drop late last week and is parked at $21,490.

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Editing by Ana Nicolaci da Costa and Jamie Freed

Our standards: The Thomson Reuters Trust Principles.

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