Asia joins global stock rout as concerns mount over inflation, US debt limit

Japan's benchmark Nikkei index opened down 2 per cent. PHOTO: REUTERS

SYDNEY (BLOOMBERG) - Asia markets slumped on Wednesday (Sept 29) after US stocks saw their worst day since May overnight on rising fears about inflation and the US debt-ceiling impasse in Washington.

Japan's benchmark Nikkei tumbled 2.46 per cent, hurt by the general mood as the country's ruling party votes for a new leader who will almost certainly become the next prime minister ahead of a general election due in weeks.

Hong Kong and China stocks also dropped on the deepening debt crisis at China Evergrande Group. The Shanghai Composite Index lost 1.3 per cent while Hong Kong's Hang Seng Index slipped 0.4 per cent.

Australia's S&P/ASX 200 Index fell 1.2 per cent and South Korea's Kospi index sank 1.9 per cent.

Singapore's Straits Times Index was holding up better, down just 0.16 per cent as of 10.54am local time.

S&P 500 futures rose 0.4 per cent as of 11.33am in Tokyo after the S&P 500 plunged 2 per cent overnight - the most since May. Technology shares fared worse than economically sensitive stocks as Treasury yields climbed on inflation fears.

Ten-year Treasury yields stabilised. Earlier, the yield on the 30-year note jumped almost 10 basis points.

During a Senate hearing on Tuesday, US Federal Reserve chair Jerome Powell and Treasury Secretary Janet Yellen both warned that a US default due to a failure to raise the debt ceiling would have catastrophic consequences. Republicans blocked a Democratic move in the Senate to raise the debt limit.

Heated remarks from Senator Elizabeth Warren also weighed on markets. After slamming Mr Powell on his track record over financial regulation,Ms Warren said he's a "dangerous man to head up the Fed" and that's why she'll oppose his renomination.

The debate in Washington is the latest headwind for investors reeling from surging energy costs at the same time central banks are laying down plans to withdraw some of the pandemic stimulus. US consumer confidence dropped in September for a third straight month, suggesting concerns over the Delta variant and higher prices continue to dampen sentiment.

"What we got here is stock market that finally looks vulnerable as Treasury yields surge, oil prices look like they could easily hit US$90 a barrel, and as supply chain issues show no signs of easing," said Edward Moya, senior market analyst at OANDA. "There is a lot of drama happening on Wall Street and most of it has to do with a reset of inflation expectations."

In the latest Evergrande news, the developer is selling a stake in its regional bank for about 10 billion yuan (S$2.1 billion) as it offloads assets to address its debt crisis.

It is facing another bond interest payment after giving no sign that it had paid a separate one last week.

Elsewhere, the pound traded around the lowest since January as expectations of higher rates were offset by surging energy prices and panic-buying in the UK that are keeping investors cautious. Bitcoin was trading below US$42,000.

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