MARKET UPDATE

Asia FX sinks, dollar hits five-week high.

Most Asian currencies sank on Monday, while the dollar rose to a five-week high as a stronger-than-expected U.S. inflation reading drove up fears that the Federal Reserve could keep raising interest rates.

Concerns over worsening economic conditions in China also kept sentiment towards Asian assets dim, especially amid reports of a looming default for one of the country’s largest real estate developers.

Dollar buoyed by stronger inflation

The dollar index and dollar index futures rose nearly 0.2% each in Asian trade, hitting their highest levels since early-July after strong consumer and producer inflation readings for July.

The higher readings pushed up concerns that the Fed will need to maintain its hawkish stance for longer than expected to bring down sticky price pressures.

The prospect of rising U.S. interest rates boosted the dollar and Treasury yields, and kept investors shy of high-risk Asian markets. With U.S. interest rates set to remain at over 20-year highs until at least early-2024, Asian currencies are unlikely to see any relief in the near-term.

 

Oil prices slip as rising inflation boosts dollar,.

Oil prices fell slightly on Monday, coming under pressure from a stronger dollar amid signs of resurgent U.S. inflation, while concerns over slowing Chinese growth also dented sentiment.

Losses in crude markets were limited as recent production cuts by Saudi Arabia and Russia pointed to tighter markets. Crude prices remained close to their strongest levels for the year.

But while oil prices had a strong rally over the past two months, they faced some resistance in recent weeks as markets questioned the outlook for oil demand, amid worsening conditions in China and potentially higher U.S. interest rates.

Brent oil futures fell 0.1% to $86.61 a barrel, while West Texas Intermediate crude futures fell 0.2% to $83.03 a barrel by 21:58 ET (02:58 GMT).

The dollar was the biggest source of pressure on oil markets, with the greenback sitting at a five-week high after higher inflation readings from last week.

 

Asian stocks slammed by China woes.

Most Asian stocks sank on Monday, with Chinese indexes leading losses on persistent concerns over slowing economic growth, while stronger U.S. inflation readings also pushed up fears of a more hawkish Federal Reserve.

U.S. producer price index inflation read higher than expected on Friday, indicating that inflation was seeing a potential resurgence after retreating in the first half of the year. The reading, which came after data also showed an increase in consumer price index inflation, pushed up concerns that the Fed will have more impetus to keep raising interest rates.

Wall Street indexes sank on Friday, providing a weak lead-in to regional markets.

Chinese stocks lead losses on property woes, stimulus uncertainty

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 1.3% and 0.9%, respectively, on Monday. Hong Kong’s Hang Seng index slid 2.5%, hit by a mix of tech weakness and property sector losses.

Heavyweight Chinese property stocks were hit with a fresh wave of selling after Country Garden (HK:2007), one of the country’s biggest developers, warned of a massive, $7.6 billion loss in the first half of 2023.

 

 

 

 

 

 

 

 

 

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