Asia shares hit three-and-a-half-year lows on China anxiety

Wednesday, 30 September 2015 00:00 - - {{hitsCtrl.values.hits}}

Man walks past an electronic board showing Japan's Nikkei average outside a brokerage in Tokyo

Asian shares skidded to 3-1/2-year lows and the dollar sagged on Tuesday, pulled down by sharp losses on Wall Street after weak Chinese data rekindled worries about its fragile economy.

Commodities struggled after fears of weaker demand pushed them to multi-year lows overnight. Adding to the gloom, commodity trader Glencore’s Hong Kong-listed shares were around 28-percent lower on Tuesday, after its London-listed stock plunged on debt worries a day earlier.

European markets aren’t expected to be spared the selloff either. Financial spread betters are predicting Britain’s FTSE 100 would open down by as much as 0.8%, Germany’s 0.6%, and France’s CACM 40 1%.

“Investors are worried about a sharp slowdown in China ... but the biggest risk is a global recession, not just a China issue,” said Steven Leung, a director at UOB Kay Hian in Hong Kong.

“If you look at Japan ... its economy is in bad shape. And economic situation is not good in Europe, either.”

MSCI’s broadest index of Asia-Pacific shares outside Japan slumped 2.3%, touching its lowest levels since June 2012 and extending early declines after Chinese shares opened lower.

China’s blue-chip CSI300 index and the Shanghai Composite Index were down 2% and 1.9% respectively in afternoon trading.

Japan’s Nikkei stock index tumbled to 8-months, ending down 4.1%.

“There is a lot of red in Asian equity markets at the moment,” said Martin King, co-managing director at Tyton Capital Advisors.

“Disappointing industrial profits in China continue to bolster concerns about growth and many investors are taking profits from the Nikkei and sitting in cash and alternatives, or repatriating capital to western markets in a perceived flight to quality.”

Chinese industrial companies’ profits fell at their fastest rate in four years, official data showed on Monday, sparking fresh fears about the strength of that country’s economy ahead the final reading of China’s Caixin Purchasing Managers’ Index on Thursday.

On Wall Street overnight, major indexes all closed sharply down. The S&P 500 index hit a one-month low on bullish U.S. consumer spending data in August as it raised concerns the Federal Reserve could hike rates at a time of slackening global growth.

The Fed held off from raising interest rates at its meeting earlier this month, citing worries about the global economy, particularly China.

But New York Fed President William Dudley said the central bank remains on track for a likely rate hike this year and could move as soon as next month.

John Williams, head of the San Francisco Fed, also signalled support for an interest rate hike this year, though Chicago Fed chief Charles Evans sounded a far more dovish tone.

U.S. non-farm payrolls on Friday could add more clarity to the timing of a U.S. policy move, and prop up the sagging greenback.

For now, lower U.S. Treasury yields continued to pressure the dollar, as investors sought the safety of fixed-income assets.

The yield on the benchmark U.S. 10-year note stood at 2.068%, below its U.S. close of 2.095% on Monday.