The CSI300 index for China (.CSI300) fell by 0.96%.
Singapore (Reuters): Wednesday was the worst day for Asian stocks in two years. A stronger dollar, instability in the U.K. bond market, and upcoming U.S. inflation data all led to a wild session on Wall Street and more uncertainty for investors.
Sterling stayed at its lowest point in two weeks after Bank of England Governor Andrew Bailey said again on Tuesday that the central bank will end its emergency bond-buying programme this week and told pension fund managers to finish rebalancing their positions in time.
“In the UK, they have high inflation, and the Kwarteng fiscal policy package was going to make it even worse,” said Damien Boey, the chief macro strategist at Barrenjoey in Sydney. “So you’re making the Bank of England do more work than it needs to. “The risk premium on the gilt market goes up a lot.”
In Japan, the rising dollar broke through 146 yen for the first time since 1998. This caused the government in Tokyo to promise to take action if needed on the foreign exchange market. The Nikkei share average (.N225) fell 0.18%.
MSCI’s broadest index of Asia-Pacific shares outside of Japan (.MIAPJ0000PUS) was down 0.87 percent, while Seoul’s KOSPI index (.KS11) was down 0.41 percent, and Australia’s resources-heavy index (.AXJO) was up 0.05 percent.
In early trading, the CSI300 index for China (.CSI300) was down 0.96 percent and the Hang Seng index for Hong Kong was down 1.94 percent.
Due to the turmoil in the British economy and a sudden rise in the value of the U.S. dollar, the British pound fell to a two-week low of 1.0949, while the risk-averse Australian dollar fell to $0.6247, its lowest level since April 2020.
Even elsewhere, there wasn’t much good news.
The International Monetary Fund lowered its prediction for global growth in 2023 from 2.9% to 2.7%, saying that inflation, energy and food crises caused by war, and higher interest rates could push the world into a recession and make financial markets unstable.
The BOE told UK pension funds and other investors to get their finances in order by Friday, when it will end a huge bond-buying programme meant to stop gilts and sterling from moving up and down like a roller coaster.
Stocks on Wall Street fell because of the warnings, which came before U.S. inflation data on Wednesday and Thursday that is expected to keep the Fed on a path of aggressive rate hikes.
Overnight, the S&P 500 and Nasdaq Composite fell 0.65% and 1.10%, respectively, but the Dow Jones Industrial Average (.DJI) closed up 0.12%.
After opening at 3.9510%, benchmark 10-year notes were at 3.9511%.
By 0033 GMT, Brent crude futures had dropped 51 cents, or 0.5%, to $93.78 per barrel. The price of a barrel of U.S. West Texas Intermediate crude fell by 69 cents, or 0.8%, to $88.66. It was the third drop in a row, and investors were worried about falling fuel demand and China’s plans to tighten COVID-19 limits.
Spot gold fell 0.2% to $1,661.5 an ounce.
