Tuesday’s Asian trade was subdued due to concerns over a probable US government shutdown and the Chinese economy.
In early trade, Japan’s benchmark Nikkei 225 index fell 0.8%. The S&P/ASX 200 in Australia fell 0.5%, while the Kospi in South Korea fell 1.2%. The Hang Seng in Hong Kong fell 0.6%, while the Shanghai Composite remained unchanged. Indonesian stocks were likewise flat, while benchmark indices in Singapore and Taiwan fell.
Investors are anticipating the publication of Chinese economic statistics later this week.
“The Chinese property woes are far from over, as the notorious developer Evergrande defaulted on its 4 billion yuan onshore bond repayment and delayed the restructuring meetings,” Tina Teng, market analyst at CMC Markets APAC & Canada, stated.
Wall Street recovered some of its heavy losses from the previous week. The S&P 500 gained 17.38 points, or 0.4%, to 4,337.44 after having its worst week in six months. The Dow Jones Industrial Average rose 43.04 points, or 0.1%, to 34,006.88, while the Nasdaq Composite rose 59.51 points, or 0.5%, to 13,271.32.
The realization is setting in that the Federal Reserve will most likely maintain interest rates high for the remainder of the year. The Fed is attempting to bring high inflation back down to its target level, and it said this week that it will likely lower interest rates in 2024 by less than previously anticipated. Its key interest rate has risen to its highest level since 2001.
The rising belief that interest rates would remain higher for an extended period of time has driven bond yields to their highest levels in more than a decade. As a result, investors are less ready to pay high prices for all types of assets, particularly those regarded as the most expensive or requiring their owners to wait the longest for significant gain.
The 10-year Treasury yield increased to 4.53% from 4.44% late Friday, nearing its highest level since 2007. This is a significant increase from roughly 3.50% in May and 0.50% about three years ago.
“Stocks digest gradual, growth-driven increases in interest rates far better than rapid increases driven by other factors such as inflation or Fed policy,” according to a paper by Goldman Sachs analysts led by David Kostin.
Higher rates are at the top of a lengthy list of worries for Wall Street. Not only have oil prices risen by $20 a barrel since June, but global economies are in disarray. The restart of student loan repayments in the United States may potentially erode what has been the country’s greatest strength, household expenditure.
In the short future, the United States government may face another shutdown due to fresh political squabbles on Capitol Hill. However, Wall Street has survived prior shutdowns, and “history shows that past ones haven’t had much of an impact on the market,” according to Chris Larkin, managing director of trading and investment at Morgan Stanley’s E-Trade.
In the oil market, benchmark US crude fell 7 cents to $89.61 a barrel. Brent crude, the worldwide benchmark, dropped 14 cents to $93.15 a barrel. Since the early summer, oil prices have risen dramatically.
The US dollar gained to 148.93 Japanese yen from 148.84 yen in currency trade.