Asian Shares See Best Day in Weeks Amid Worries Over Elevated Interest Rates
SINGAPORE, Sept 29 – Asian shares experienced their strongest day in weeks on Friday, but are still on track for their worst quarterly performance in a year due to concerns over elevated interest rates. Despite the positive day, worries continue to linger, causing the dollar to wobble and oil prices to hold steady.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 1%, marking its biggest one-day percentage increase in four weeks. However, the index remains close to the 10-month low it reached on Thursday and is set to record a 4% drop for the July-September period, its worst quarterly performance since last year’s 13.6% decline.
In Europe, futures suggest that the relief rally may continue, with Eurostoxx 50 futures up 0.07%, German DAX futures up 0.19%, and FTSE futures up 0.12%.
Investors are closely watching upcoming economic data, including the U.S. personal consumption expenditures price index and euro zone inflation data. Economists polled by Reuters expect the euro zone inflation rate to fall to 4.5% in September from 5.2% in August. Germany has already seen a decrease in inflation this September.
The recent rise in Treasury yields to 16-year highs has cast a shadow over the stock market, with the Federal Reserve’s hawkish stance last week also impacting risk sentiment. Although recent data shows the U.S. economy maintaining a solid pace of growth, concerns are growing due to a potential government shutdown and an ongoing strike by auto workers.
The current GDP figure is not seen as a significant threat according to Ryan Brandham, head of global capital markets, North America at Validus Risk Management. Brandham notes that Federal Reserve Chair Jerome Powell evaluates whether GDP poses a risk to achieving the 2% inflation target.
In Asia, Japan’s Nikkei was slightly lower, while Australia’s S&P/ASX 200 index rose and Hong Kong’s Hang Seng Index surged 2.7%. The Chinese markets were closed for a holiday and will remain on a break next week.
Investor focus is particularly on the Chinese property sector, following news that China Evergrande Group’s founder is being investigated for suspected “illegal crimes.”
In the foreign exchange market, the dollar index decreased slightly but remains near its 10-month high. The Japanese yen is at a level that may trigger intervention from Japanese authorities.
Oil prices experienced a temporary pause in their rally but regained some ground on Friday. Traders are weighing expectations of supply increases by Russia and Saudi Arabia against positive demand forecasts from China during its Golden Week holiday.
Gold prices are set to experience their biggest monthly fall since February, with spot gold hovering around six-month lows.
Reporting by Ankur Banerjee in Singapore; Editing by Lincoln Feast & Simon Cameron-Moore