Asian shares fall as global growth worries add to regional headwinds

A man wearing protective face mask, following an outbreak of the coronavirus disease (COVID-19), walks in front of a stock quotation board outside a brokerage - Reuters

HONG KONG (Reuters): Asian shares were set for their worst day in two weeks on Thursday, weighed down by the latest regulatory crackdown in China and global investors’ worries about a looming reduction in central bank stimulus, while the dollar held firm.

European shares looked set to follow suit, with FTSE futures off 0.65% and pan-region Euro Stoxx 50 futures down 0.8%, in early trading ahead of a closely watched announcement from a meeting of the European Central Bank.

Analysts anticipate the ECB will announce a token step towards reducing its emergency economic support.

MSCI’s broadest index of Asia-Pacific shares outside Japan was last down 1.26%, which would be its worst daily performance since 19 August, the last time markets decided they were worried about the US Federal Reserve tapering its massive asset purchase program.

US stock futures, the S&P 500 e-minis, were down 0.45%.

“The global story is looking soft and it’s being hit by the Delta variant plus concern about potentially the Fed still moving towards a taper. It’s an unsettling combination of things that I think is weighing on the market at the moment,” said Rob Carnell Asia head of research at ING.

“Until we actually get the taper announcement ... it’s going to be that sort of environment where it’s glass half full, glass half empty depending on who’s reading the tea leaves that day.”

Strong US job openings data overnight went some way to turning around the mood after investors had been betting the lower-than-expected payroll reading last week would mean the Federal Reserve would delay trimming its stimulus, sending MSCI’s world equity index to a new all-time on Tuesday.

But local factors also played a part in Asian shares’ declines on Thursday.

Hong Kong was among the biggest fallers shedding 2.02%, dragged down particularly by Chinese tech stocks after Chinese authorities told gaming firms to resolutely curb incorrect tendencies such as focusing ‘only on money’ and ‘only on traffic’.

This hurt companies with large gaming operations, and Tencent fell 6%, Bilibili lost 6.6% and NetEase shed 7.4%.

Korea’s Kopsi fell 1.5%, also weighed by regulatory scrutiny of local tech players. In Korea’s case, fintech names such as Kakao Corp, which sank 7.2%, and Naver Corp., down 6.9%, were in the spotlight. Australia lost 1.97% after payrolls data showed a sharp drop in jobs in the first half of August, and Chinese blue chips lost 0.63%. Following its meeting on Thursday, analysts polled by Reuters expect the ECB to announce a cut to the pace of its emergency bond purchases from next quarter but to keep buying bonds at least until 2024 under its main program, and possibly much longer. read more

Ahead of the decision, the euro slipped to $ 1.1815, a little off Friday’s two-month high of $ 1.1909, while the dollar inched higher against a basket of its peers, having gained in the previous three sessions. Benchmark 10-year Treasury notes yielded 1.3292%, little changed in Asian hours, having edged lower on Wednesday after a strong auction by the US Treasury.

Oil prices were steady as production in the US Gulf of Mexico output following Hurricane Ida gradually came back on line.

US crude was flat at $ 69.29 a barrel. Brent crude was up 0.12% at $ 72.68 per barrel.

Gold dropped slightly, hurt by the stronger dollar, languishing near two-week lows with the spot price at $ 1,787.83 per ounce off 0.06%.