Asia stocks slide, US dollar climbs on Fed taper, virus fears

HONG KONG • Asian stocks slumped to their lowest levels this year and the US dollar hit 10-month highs yesterday as a double whammy of worries about global growth and an end to US central bank support drove nervous investors towards safety.

Commodities were also sold, with oil down for a sixth straight session and at three-month lows, while copper, a bellwether of growth, fell to a two-month trough.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 2 per cent to its lowest level this year. S&P 500 futures fell about 1 per cent by yesterday evening and Europe's pan-regional Stoxx 600 index suffered its biggest daily decline in a month with a 2 per cent slide.

Singapore's Straits Times Index ended down 1.42 per cent yesterday, despite the further easing of Covid-19 curbs locally and anticipation of some travel reopening.

"You can't find a bull out there," said Mr Kay Van-Petersen, a global macro strategist at Saxo Capital Markets in Singapore.

He said that "an accumulation of things" - from the spread of the Delta virus variant to a tech crackdown in China to the impression from Federal Reserve minutes that a slowdown in asset purchases looms - was enough to sink fragile sentiment in Asia.

The US dollar rose 0.3 per cent to 1.1665 per euro, hitting its highest since November last year along with the dollar index, as the greenback made 2021 peaks on the Australian and New Zealand dollars.

Selling pressure in stock markets extended from Chinese tech shares to semiconductors and miners. The Hang Seng tech index fell to its lowest level since its launch last year. The broader Hang Seng dropped 2.13 per cent.

Alibaba's Hong Kong shares slid 5.54 per cent to a record low, extending a sell-off in Chinese technology giants after Beijing hit the industry with more regulations.

The shares dropped after China said it is studying separate proposals to further ensure the rights of drivers who work for online companies and to step up oversight of the live-streaming industry.

Sentiment for China's largest advertising platform also soured after peer Tencent Holdings' executives said in a post-earnings conference call that the government can make fairly substantial changes to how companies use data for advertising.

Shares of chip giant Taiwan Semiconductor Manufacturing Company fell 2.61 per cent and had Taiwan's benchmark on course for its worst session since May, while tumbling iron ore prices pushed shares in global miners BHP and Rio Tinto to their lowest in months.

The two miners look set for their worst weekly drops since the height of pandemic panic in markets last year, even after BHP reported its best profit in almost a decade on Tuesday.

"The spreading Delta variant is pushing down economic growth," said market strategist Ayako Sera of Sumitomo Mitsui Trust Bank.

"But on the other hand, in the grand scheme of things, the Federal Reserve and some other central banks are starting to remove stimulus they began to deal with the pandemic... so the balance is tilting in the direction of risk-aversion."

The CBOE Volatility index, Wall Street's "fear gauge", jumped 3.66 points to its highest in about a month overnight, and the S&P 500 fell 1 per cent to a two-week low.

Minutes from the Fed's July meeting showed that officials expect to ease stimulus this year, but there was division over recovery in the labour market and the level of risk posed by rises in Covid-19 cases.

The focus now shifts to the Fed's annual research conference in Jackson Hole, Wyoming, next week for any read about its next steps.

United States Treasury yields held near recent lows in Asia. Benchmark 10-year notes were last at 1.265 per cent, with growth wobbles driving demand for bonds.

ANZ analysts said rising US inventories fuelled fears of weaker demand amid a worldwide virus spike.

Brent crude was down US$2.10, or 3.1 per cent, at US$66.13 at 0905 GMT (5.05pm Singapore time), after touching its lowest since May 21.

The stronger US dollar also dragged on gold, with the spot price dropping 0.5 per cent to about US$1,776.66.

REUTERS, BLOOMBERG