Asian markets appeared ready to start October on the back foot, after their American counterparts extended their largest monthly loss since March 2020.
In early Asia trade, futures indicated lower in Japan and Australia and were steady in the United States. China begins a week-long holiday on Friday, while Hong Kong’s stock market is closed. US stocks slumped Thursday, despite confirmation that the House had approved a nine-week budget measure to avert a government shutdown in the United States. The S&P 500 index closed at its lowest level since July, bringing September’s loss to over 5%. Economically vulnerable sectors such as industrials and financials performed poorly.
Treasuries rallied, with the yield on the 10-year note falling below 1.50 percent. The dollar surrendered a portion of this week’s gains. Crude oil moved higher during a wild day in which China’s top energy companies were reportedly ordered to secure energy supply at all costs in the face of shortages, prompting the White House to reaffirm its own concerns about rising prices.
As investors brace for the Federal Reserve’s tapering of stimulus, concerns about slowing economic growth, rising inflation, supply-chain bottlenecks, a global energy crisis, and regulatory dangers emerging from China are growing. The US market benchmark’s near-record technical streak has some bulls concerned that a major correction is overdue.
“We are not blind to the cliche that the market climbs a wall of worry,” said Tom Mantione, managing director of UBS Private Wealth Management. “While investors are concerned about China, the pandemic, the debt ceiling, and tax legislation at the moment, it is critical to recognise which concerns will result in structural change and which will result in short-term volatility that investors may profit from.”
Washington’s political squabbling threatens to drag the US into default, compelling President Joe Biden to cut back his spending agenda. House Speaker Nancy Pelosi pressed ahead with a vote on a bipartisan infrastructure measure, despite progressive Democrats’ assertions that they have the votes to postpone it until the Senate agrees on a more expansive tax and spending package.
Elsewhere, China Evergrande Group began refunding a chunk of money owed to buyers of its investment products weeks following protests over delayed payments.
Published by Zack Baharum