Image: Reuters Berita 24 English - Tuesday was the sixth day in a row that Asian stocks went down. This was because a new rise in European ...
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| Image: Reuters |
Berita 24 English - Tuesday was the sixth day in a row that Asian stocks went down. This was because a new rise in European energy prices increased fears of a recession, drove up bond yields, and sent the euro to its lowest level in 20 years.
Benchmark gas prices in the European Union jumped 13% overnight to a record high. They have doubled in just a month and are now 14 times higher than the average of the last 10 years.
Analysts at Citi warned that Britain's inflation could reach 18% if prices for energy aren't kept down.
Surveys of European and British manufacturers, which were set to come out later on Tuesday, were expected to show how bad the situation was, with Germany expected to be even further into contractionary territory.
Tapas Strickland, a director of economics at NAB, said, "Europe's bad energy situation suggests that inflation hasn't reached its peak yet, and there's still a chance that high inflation will stay high for a long time if the central bank doesn't act more aggressively."
"It's not surprising, then, that the USD is close to its highest level in decades, while the EUR and GBP are falling."
The single currency was struggling at $0.9937, after dropping 1% to $0.99265, which was its lowest point in 20 years. The break of the July low at $0.9952 was seen as a sign that the price would keep going down, since there wasn't much chart support left.
Sterling was down to $1.1766 after falling as low as $1.1743, which was the lowest it had been since March 2020, when the pandemic started. The dollar index went up to 108.870, which was very close to its peak in July.
In Asia, worries about China's economy kept rising as lending rates went down and people talked about giving property developers another round of government loans.
Oliver Allen, a market economist at Capital Economics, said, "It would be bad enough for Chinese stocks if the economy's problems were limited to the real estate market."
"But it doesn't look like growth in the services sector will pick up much as long as China's zero-COVID policies stay in place. The export boom caused by the pandemic is coming to an end, and power shortages caused by droughts in some parts of the country are likely to slow down industry in the near future."
Chinese blue chips went down by 0.2% because the latest policy easing didn't do much to help them.
FED HAWKS RULE
MSCI's broadest index of Asia-Pacific shares outside of Japan fell by 0.4% and has gone down every day in the past week.
The Nikkei fell 1.2% after a PMI survey showed that factory activity in Japan slowed to its lowest level in 19 months in August. This was because raw material and energy costs have been going up for a long time.
Futures for the EUROSTOXX 50 and the FTSE were both down a little bit after falling overnight.
S&P 500 futures and Nasdaq futures both went up by 0.1%, but that was after big drops on Monday, when tech stocks were hurt by rising bond yields. [.N]
On Monday, the yield on the benchmark 10-year U.S. bond hit a five-week high of 3.040%, and the yield on the 30-year bond hit a seven-week high of 3.268%.
Last time I looked, the yield on a 10-year bond was 3.029%, which is 50 basis points higher than where it was in early August.
The move is partly due to hawkish comments from Federal Reserve officials, which has led the market to price in a 55% chance of a 75 basis-point hike to 3.0-3.25% in September and a peak rate of around 3.75%.
Gold has been hurt by the rise of the dollar and yields. It was hovering around $1,740 per ounce after hitting a three-week low overnight. [GOL/]
Overnight, oil prices went back and forth, and Saudi Arabia warned that the OPEC+ alliance of producers could cut output. [O/R]
Prices have gone down because of worries about demand and the possibility of a nuclear deal that would let sanctioned Iranian oil back onto the market.
Brent went up 78 cents to $97.26 per barrel, while U.S. crude went up 78 cents to $91.14 per barrel.
