GLOBAL MARKETS-Asian shares slip as Evergrande, inflation worries sap positive mood

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TOKYO, Oct 4 (Businesshala) – Asian stocks fell on Monday as concerns about China’s asset sector and inflation concerns were offset by US data and positive news on new drugs to fight the coronavirus.

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Trading in debt-ridden China Evergrande was suspended after it missed a key interest payment on its offshore debt obligation for the second time last week.

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“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.”

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MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3%. The index posted its first quarterly decline in six quarters.

Hong Kong led the decline, with the Hang Seng index down 1.9%. Japan’s Nikkei fell 1.4% to a one-month low of 28,375, erased earlier gains.

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.

MSCI’s broadest gauge of world stocks, the ACWI, slipped 0.1% to 711.92, not far from a three-month low on Friday at 705.27.

Investor sentiment rose on Friday after Merck & Co. said an experimental oral antiviral treatment that could reduce 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 showed higher inflation, along with increased consumer spending and accelerating factory activity.

Data published on Friday also showed that euro zone inflation 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 Fed Chair 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.

There is hope that increased inflation could prompt the Federal Reserve to push forward its timeline for tightening monetary policy, which has boosted US bond yields last week.

But yields have drifted away from last week’s multi-month peak as month-end bond prices rallied.

The 10-year US Treasury yield stood at 1.460% compared to Tuesday’s three-month high of 1.567%.

Lower US yields also had an impact on the dollar in the money market. The euro fell back to $1.1608 from Thursday’s 14-month low of $1.1563.

The US currency fell to 111.00 yen, down from Thursday’s 1 1/2-year high of 112.08 yen.

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 $78.99 a barrel in early trade.

Editing by Ana Nicolasi da Costa

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