Asian markets mixed as bargain buying fuels fears about the outlook

September 6, 2022
6:53 am

AFP NewsNetwork

Asian markets mixed as bargain buying fuels fears about the outlook

Asian investors struggled to recover from the previous day’s losses on Tuesday amid growing concerns over Europe’s deepening energy crisis, China’s economic slowdown and the central bank’s efforts to curb rising inflation.

However, the dollar lost some momentum against its main peers on profit-taking, with the euro finding some support ahead of an expected European Central Bank rate hike and sterling boosted by the election of a new prime minister.

Russia’s decision not to resume gas supplies to Europe – in retaliation for sanctions on Ukraine – sent shockwaves through stock markets on Monday as it fueled expectations of a painful recession in major economies.

European bourses bore the brunt of the selling, although they were able to erase their earlier losses, as commentators said the shutdown was expected at some point.

With Wall Street closed for a holiday, Asia had few new catalysts to fuel buying.

At the start of trading, markets fluctuated between gains and losses, with Hong Kong, Seoul and Wellington falling while Shanghai, Sydney, Singapore, Taipei and Jakarta edged up. Tokyo and Manila were flat.

“A lot of clients are asking, have we bottomed out and are we going into a global recession?” BNP Paribas Wealth Management Hong Kong’s Grace Tam told Bloomberg Television.

“We believe that the risk of a global recession, particularly next year, is actually quite high” and that the energy crisis “is not fully priced into markets,” she said.

The next major event for investors is Thursday’s ECB interest rate decision, with some observers predicting a 75 basis point hike to ease record-high inflation.

Later in the month is the Federal Reserve meeting, where policymakers will discuss a similar move that would be the third straight hike.

However, while central banks are raising borrowing costs to fight rising prices, they have little control over oil costs, a key driver of the rise.

And on Monday, OPEC and other major producers announced a surprise cut in production, sending both major contracts higher. The move came after the crude oil market fell in recent months on demand fears over a possible recession.

“In absolute terms, cutting supply by 100,000 barrels a day doesn’t matter that much to global supply balances,” said Noah Barrett of Janus Henderson Investors.

“However, in terms of signalling, the move is important as it indicates that OPEC+ is watching demand very closely and trying to manage supply to keep oil prices down.”

Several countries, including the United States, had previously called for an increase in production, which was followed by a small increase of 100,000 barrels.

“The modest increase we got a month ago is now gone, so OPEC+ is clearly sending a message that it is not bowing to outside demands,” Barrett said.

“We should expect continued volatility in oil prices, with global demand indicators driving price action.”

Brent and WTI were both below Monday’s levels.