Asian markets sink as US data fails to temper virus woes

HONG KONG (AFP) – Asian markets sank yesterday as a slowdown in United States (US) consumer inflation failed to overcome concerns about the fast-spreading Delta variant, while Hong Kong was dragged by a collapse in casino firms as Macau unveiled a planned crackdown on the sector.

After a bright start to the month, equities around the world have gone into reverse in recent sessions as confidence is shaken by the virus, with a number of countries seeing a worrying jump in new cases that have forced some, including China, to re-impose tough containment measures.

Investors are also having to grapple with a range of other issues including Federal Reserve plans to taper monetary policy, China’s regulatory crackdown on private enterprises and a possible default by Chinese property giant Evergrande, which is teetering under debts of more than USD300 billion.

Data Tuesday showing US consumer prices rose last month at a slower pace than expected soothed concerns that inflation could force the Fed to begin winding down its market-supporting policies earlier than thought.

The reading had taken on particular importance after producer prices – what firms pay at the factory gate – hit a record high in August owing to rising demand and tighter supplies.

The figures showed a slight dip, appearing to back up Fed officials’ insistence that the sharp rises were temporary because of the reopening and short-term supply issues.

But US investors shrugged at the news and sent all three main indexes into the red.

People walk by an electronic stock board of a securities firm in Tokyo. PHOTO: AP

Analysts pointed out that the easing came on the back of concerns about the spread of the Delta variant, which is sending infection rates surging. That led to a sharp drop in airline fares, while used car sales – a major cause of recent inflation spikes – also fell.

However, National Australia Bank’s Rodrigo Catril said, “There are still many factors suggesting inflation is unlikely to ease significantly. Inflation remains strong for food, housing and other goods.

“The decline in airline fares and hotel room rates are likely to reverse as the Delta wave fades.”

While noting that the print would ease pressure on the Fed to tighten policy, he added that “debate on higher US inflation has not gone away and next year the big focus will be to what extent the expected rise in wages will deliver longer-lasting upward pressure on prices”.

A taper in November or December still looked likely, he said.

And Dana D’Auria, of Envestnet Inc, told Bloomberg Television: “It is hard to argue at this point that (inflation) remains entirely transitory.

“You couple that with the fact that there are still all these supply shocks that we are still working through. I think the markets are going to have to feel the pain.”

Asian markets were under pressure, with below-par retail sales data further indicating China’s economy continued to slow in August.

Tokyo, Shanghai, Singapore, Sydney, Wellington, Manila and Jakarta all fell, though Seoul, Bangkok and Mumbai managed gains.

London dipped as data showed United Kingdom inflation spiked to a nine-year high last month. Paris and Frankfurt also edged lower.

Meanwhile, observers said the selling in September was not much of a surprise.

“September is the only month in the calendar year with historically negative returns if you look back 50 years or more,” said markets strategist Louis Navellier.

“That’s not a guarantee, as some Septembers have been great, but the long-term trend suggests that we should be on the lookout for sell-offs in Septembers.”