Asian shares wobble as Evergrande, inflation worries hit confidence

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TOKYO (Businesshala) – Asian stocks fell on Monday as concerns about China’s asset sector and inflation concerns offset US data and positive news on new drugs to fight the coronavirus.

FILE PHOTO: An electric board shows the Nikkei index outside a brokerage in a business district in Tokyo, Japan, June 21, 2021. Businesshala / Kim Kyung-hoon

Trading in debt-ridden China Evergrande was suspended pending the announcement of a major transaction. This comes days after the beleaguered developer missed a major interest payment on its offshore debt obligation for the second time.

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Chinese media reported on Monday that Evergrande would sell half a stake in its asset management unit for more than $5 billion, however, that news did little to quell sentiments.

“The biggest problem is not the default by Evergrande, but the environment that has led to its downfall. Authorities are regulating housing loan and lending to property firms. Markets are already looking for the next Evergrande,” said Kazutaka Kubo, senior economist at Okasan Securities.

“There is a growing risk that Evergrande’s crisis will spread to the entire Chinese property sector.”

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1%.

Hong Kong’s Hang Seng index fell as much as 2.7% to its one-year low last month, while Japan’s Nikkei was down 1.1% to a one-month low.

Markets in the Chinese mainland will remain closed until Thursday for the National Day holiday, while South Korean markets will also remain closed on Monday.

European shares are expected to rise slightly in Wall Street’s rally on Friday, with Euro Stokes futures and Britain’s FTSE futures trading 0.3-0.4% higher.

Merck & Co. said investor sentiment rose after an experimental oral antiviral treatment that could halve the chances of dying or being hospitalized for people at risk of contracting severe COVID-19. Is.

A host of US economic data released on Friday also showed an increase in consumer spending and a pick-up in factory activity, though high inflation kept alive worries central banks may need to raise interest rates sooner than currently expected.

Euro area inflation also hit a 13-year high last month and is still likely to jump higher.

Investors fear global inflation could last longer than expected, with continued rise in commodity prices and ongoing supply disruptions in many parts of the world, despite Federal Reserve Chairman Jerome Powell’s insistence that high inflation is fleeting. .

The core US PCE price index, the Federal Reserve’s preferred inflation measure for its flexible 2% target, rose 3.6% in August from a year earlier, its biggest increase in three decades, and matches July’s gains.

Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan, said: “While Powell sticks to his script that inflation will be transitory, he has recently begun to withhold his comments, leading investors to suspect that he too will be able to respond to inflation. worried about.” Stanley Securities.

(Graphic: US Inflation – )

Speculation about a tightening of the Fed’s earlier policy boosted US bond yields last week, but yields have drifted away from last week’s multi-month peak.

The 10-year US Treasury yield rose to 1.472% from a three-month high of 1.567% on Tuesday.

Lower US yields also weighed on the dollar and the euro bounced back to $1.1591, lower than Thursday’s 14-month low of $1.1563.

The US currency fell to 111.03 yen, down from Thursday’s 1-1/2-year high of 112.08 yen.

The offshore Chinese yuan fell 0.2% to 6.4499 per dollar ahead of a speech by US Trade Representative Catherine Tai that unveiled the Biden administration’s strategy for troubled US-China trade relations.

Officials in the Biden administration say China has not met its obligations in the first phase of the trade deal and intend to stick to its commitments.

Oil prices remained high, with Brent futures shying away from hitting a three-year high at the end of last month, on hopes that oil-producing countries will raise supplies in a steady manner when they meet on Monday.

Brent futures were trading 0.3% lower at $79.04 per barrel.

Editing by Ana Nicolasi da Costa and Sam Holmes

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