Asian stocks are expected to have their worst month since the COVID-19 outbreak began

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Last Updated on September 30, 2022 by Bitfinsider

On Friday, September 30, Asian shares were on track to have their worst month since the COVID-19 epidemic began, and there were further anxieties in the currency and bond markets due to hawkish remarks from central banks, concerns about a global economic downturn, and increased geopolitical risk.

A rebound in Hong Kong and among mainland Chinese bluechips countered drops elsewhere, keeping MSCI’s broadest index of Asia-Pacific shares outside of Japan mostly unchanged on Friday. The Nikkei in Japan decreased by 1.6%.

Chinese factory activity statistics that exceeded market forecasts and showed that the manufacturing sector expanded in September after declining for two months provided some solace.

Even yet, the Asian index was projected to experience a startling 12.5% decline for the month, the worst monthly decline since March 2020, when the COVID-19 epidemic rocked the financial sector.

Chinese bluechips may end September with their largest quarterly loss since the 2015 stock market crash, and Hong Kong shares were likely on track for their worst quarter since 2001.

Traders on currency markets were on edge due to the possibility of central banks intervening.

After declining by 0.9% the day before, the US dollar was little changed versus a basket of foreign currencies on Friday at 111.88.

It is up 2.9% for the month, the highest gain since April, though. The Chinese yuan, the Japanese yen, and many other emerging market currencies have all reached historic lows as a result of the dollar’s unrelenting climb.

Additionally, traders are apprehensive of potential Chinese and Japanese engagement. According to Reuters, the Chinese central bank has instructed significant state-owned banks to be ready to exchange dollars for the local currency in international markets.

In Europe, the government’s intentions for significant borrowing to finance spending have roiled the gilt market in Britain along with the pound.

After nearly a week of pandemonium on the financial markets, Prime Minister Liz Truss finally spoke out on Thursday, reiterating her commitment to her strategy to jumpstart economic growth.

That came as the European Central Bank expressed support for yet another significant interest rate hike and Europe braced itself for a double-digit inflation figure later in the day. This month, German inflation accelerated to 10.9 percent, exceeding market expectations.

The yield on 10-year bonds increased by 4 basis points in early Asia to 3.7815 percent, stabilizing US Treasuries somewhat following a new round of selling sparked by aggressive remarks from Federal Reserve officials.

The yield on two-year Treasury notes increased by a comparable amount to 4.2048 percent.

The case for the Fed to tighten more aggressively is strengthened by the robust US labor market and weekly unemployment claims hitting a five-month low. The Federal Reserve did not signal in its overnight hawkish remarks that the recent turmoil in the bond and foreign exchange markets would cause it to reconsider its course and hold off on raising interest rates.

Vladimir Putin, the president of Russia, will start annexeing four districts of Ukraine on Friday, which would further depress market sentiment. The United Nations has called this action a “dangerous escalation” that might harm peace efforts.

Early on Friday, there was minimal movement in oil prices. While Brent crude increased to US$88.51 per barrel, US crude edged up 0.11 percent to US$81.32.

Gold increased little. The going rate for spot gold was US$1663.29 per ounce.

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