Minutes from the US Federal Reserve's July meeting dented expectations for a rate hike in mid-September.
Concerns about slowing growth in China sent Asian shares to two-year lows and pressured oil prices on Thursday while minutes from the US Federal Reserve’s July meeting dented expectations for a rate hike in mid-September.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.9 percent with all markets in the region except New Zealand posting declines.
Hong Kong’s Hang Seng Index hit an 8-month low while Singapore-listed shares fell to 1 1/2-year lows. Malaysian shares sank to three-year lows.
Mainland Chinese shares also dropped 1.2 percent while Japan’s Nikkei fell 0.7 percent.
“Markets are nervous of risks and investors are pulling funds out of emerging economies and resource exporters,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
Fears that Chinese growth, which carried the global economy following the 2008 international financial crisis, is slowing in the long term are affecting the outlook for many industries, with the commodities sector among the hardest-hit.
US crude oil prices eased 0.8 percent after a fall of more than 4 percent on Wednesday following an unexpectedly large increase in US stockpiles, barely holding above its 6 1/2-year low of $40.40 per barrel.
It last stood at $40.47, with a break below $40 seen as likely to trigger a fresh wave of selling.
Brent crude futures fell 0.6 percent to $46.90, edging near the six-year low of $45.19 touched in January.
Falls in oil and other commodity prices hit many resource-exporting emerging economies hard, and they have already suffered shocks from capital outflows as the prospect of higher U.S. interest rates looms larger.
MSCI’s emerging market index set a new four-year low, having fallen 22 percent from this year’s high hit in April and coming within a stone’s throw of its Oct 2011 trough.
Minutes from last month’s Fed monetary policy meeting showed officials in broad agreement that the US economy was nearing the point where interest rates should move higher.
But they also noted lagging inflation and a weak global economy posed too big a risk to commit to “lift off”, leading some investors to question the likelihood of a rate hike in September.
US Treasury yields fell and money market futures & rolled back expectations of a rate rise in September.
The 10-year US Treasuries yielded 2.122 percent, having declined from an eight-month high of 2.500 percent touched in June.
The dollar also lost its edge against other major currencies. It fell to a three-week low of 123.68 yen on Wednesday and last stood at 123.92 yen while the euro also rose to $1.1138, extending its rebound from this week’s low of $1.10165 touched on Tuesday.
Gold also gained, rising to a one-month high of $1,135.40 per ounce.
“Following the July FOMC minutes, we retain our call for September lift-off. However, we see the bar for the rate hike as having been pushed a bit higher. The higher bar, combined with lower energy prices and a modest deterioration in the international outlook since the July FOMC, has raised risks over this call,” Rob Martin, economist at Barclays said in a report.