Asian stocks are fragile amid concerns about growth, demand for the dollar

SYDNEY, Aug 23 (Reuters) – Asian stock markets tried to pick up the pieces on Monday after last week’s crash, as worries about the coronavirus showed few signs of declining, while cash flows safe haven benefited the dollar before a key update of US monetary policy. .

A series of “flash” manufacturing surveys on Monday-August will provide an early indication of how global growth is heading in the face of the Delta variant, with analysts expecting a certain drop and especially in Asia.

Concerns about the Chinese economy have only intensified in recent weeks, while Beijing’s regulatory crackdown on the technology sector has hit markets twice.

Last week, more than $ 560 billion was wiped out of exchanges in Hong Kong and mainland China as funds worried about which sectors regulators could target. Read more

The impact was all too evident in MSCI’s broader Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS), which plunged 4.8% last week, to a nine-month low. months. By early Monday it had fallen 0.2% more, but gains seemed fragile.

Rotation spread to Japan, where the Nikkei (.N225) fell 3.4% last week, to its lowest point since January. Bargain hunting helped the index bounce 1.2% early Monday.

“After a strong V-shaped recovery, there are many signs of slower growth,” says Michael Hartnett, BofA’s chief investment strategist.

“The U.S. yield curve is at a one-year low, emerging markets are negative in YTD and copper and oil are falling double-digit from recent highs.”

He expects negative stock and credit returns in the second half of this year and suggests investors have their own defensive quality.

The spread of the Delta variant also has the potential to disrupt the timing of U.S. Federal Reserve reduction plans.

Dallas Federal Reserve Chairman Robert Kaplan, a well-known hawk, said Friday he could reconsider the need for an early start of volume reduction if the virus harms the economy. Read more

This adds further uncertainty to Fed President Jerome Powell’s speech at Jackson Hole this week, which has had to be moved online due to pandemic restrictions. Read more

“Our basic case is that the FOMC will announce a reduction in September if August’s non-farm payrolls are strong,” said Joseph Capurso, CBA’s head of international economics.

“We anticipate that the volume reduction will be implemented in October or November, although the recent rise in covid infections and deaths in some parts of the U.S. may cause Powell to pause.”

This contrasts the central market with the European Central Bank, which is under pressure to add more stimulus, giving the dollar an advantage over the euro.

“Unlike the Fed, we do not expect the ECB to move away from its ultra-double monetary policy stance,” Capurso said. “We expect the EUR to decline to a low of $ 1.12 in the first quarter of 2022, before gradually appreciating.”

The single currency was trading at $ 1.1697, after losing 0.8% last week to hit ten-month lows at $ 1.1662. In turn, this helped the dollar index to a ten-month high at 93,734, and was the last trading firm at 93,507.

The dollar made large gains in commodity and emerging market currencies and rose against the Chinese yuan.

It has been more moderate against the Japanese yen at 109.84, which also benefits from safe haven flows.

Global growth concerns hit commodities hard last week, with commodity metals, massive resources and oil falling.

Gold was more stable at $ 1,777, after a one-day fall in August.

Oil had suffered the most intense week of losses in more than nine months as investors forecast weakened fuel demand worldwide due to rising COVID-19 cases.

Earlier Monday, Brent had risen 37 cents to $ 65.55 a barrel, while US crude added 27 cents to $ 62.41.

Edited by Shri Navaratnam

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