Asia’s markets slipped backwards on Wednesday despite a slowdown in US consumer inflation, as continuing worries about the fast-spreading Delta variant dampened the mood on trading floors.
Hong Kong was dragged back even further 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 recently as confidence has been shaken by the virus again, with a number of countries seeing worrying new jumps in cases forcing some, including China, to reimpose 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 $300 billion.
Data on 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 numbers 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 were not persuaded and sent all three main indexes into the red.
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 again. 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.”
And Dana D’Auria, of Envestnet Inc, said: “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.
Hong Kong led the losses, with Macau casino operators collapsing as they became the latest to fall into China’s regulatory crosshairs.
On Wednesday, the Macau government unveiled plans to tighten control over the industry, with recommendations including reviewing the number of concessions it issues, putting representatives on the boards of operators and criminalising underground banking in the industry.
The firms were already struggling owing to the impact of the coronavirus on tourism to the city, which usually rakes in more money in a single week than Las Vegas makes in a month.
The Hang Seng Index sank 1.84%, or 469.02 points, to 25,033.21. But the Shanghai Composite Index slipped 0.17%, or 6.38 points, to 3,656.22, while the Shenzhen Composite Index on China’s second exchange eased 0.11%, or 2.76 points, to 2,486.13.
Tokyo, Shanghai, Singapore, Sydney, Wellington, Manila, Taipei and Jakarta all fell, though Seoul, Bangkok and Mumbai managed gains.
The benchmark Nikkei 225 index slid 0.52%, or 158.39 points, to end at 30,511.71, while the broader Topix index lost 1.06%, or 22.48 points, to 2,096.39.
Tokyo – Nikkei 225: DOWN 0.5% at 30,511.71 (close)
Hong Kong – Hang Seng Index: DOWN 1.8% at 25,033.21 (close)
Shanghai – Composite: DOWN 0.2% at 3,656.22 (close)
New York – Dow: DOWN 0.8% at 34,577.57 (close)
- AFP and Sean O’Meara