Asian stocks fell Monday after a US Federal Reserve official suggested a September interest rate hike still was possible and Japanese factory activity weakened (at 11:15 a.m. IST).
1. KEEPING SCORE: The Shanghai Composite Index fell 2.6 percent to 3,148.08 and Tokyo’s Nikkei 225 retreated 1.7 percent to 18,815.24. Sydney’s S&P/ASX 200 lost 1.6 percent to 5,179.50 and Hong Kong’s Hang Seng was off 0.8 percent at 21,446.44. India’s BSE Sensex fell 0.3 percent to 26,312.63 and Seoul’s Kospi declined 0.2 percent to 1,933.41. Taiwan, Bangkok and Jakarta rose while New Zealand and Singapore fell.
2. FED PLANS: The Fed vice chairman, Stanley Fisher said there was a “pretty strong case” for raising rates in September. That ran counter to recent market sentiment that China’s economic slowdown and global market volatility might prompt the Fed to wait. Speaking at the U.S. central bank’s annual gathering in Jackson Hole, Wyoming, Fisher emphasized he was not saying what action the Fed might take at its September meeting but analysts took his comments to mean he saw the economy moving close to satisfying the Fed’s conditions for a hike. It would be the Fed’s first reverse from its policy in place since the 2008 crisis of ultra-low rates that have pushed up stock prices.
3. ANALYST’S TAKE: “The Fed is still at the drawing board with regards to the specifics of the timing of a rate hike this year. But to be sure conviction for a hike this year was not watered down,” said Mizuho Bank in a report. “What’s more, a rate hike sooner rather than later is preferred on forward-looking inflation.”
4. JAPAN WEAKNESS: Industrial production declined unexpectedly by 0.6 percent in July from the previous month, defying forecasts of a small increase following June’s 1.1 percent rise. “The drop in industrial production in July suggests that economic activity will recover only slowly this quarter,” said analyst Marcel Thieliant of Capital Economics in a report.
5. ENERGY: Benchmark U.S. crude declined 63 cents to $44.59 per barrel in electronic trading on the New York Mercantile Exchange. The contract soared $2.66 the previous session to close at $45.22. Brent crude, used to price international oils, fell 71 cents to $49.34 per barrel in London after jumping $1.49 the previous day to $50.05.
6. CURRENCIES: The dollar declined to 121.02 yen from 121.38 yen on Friday. The euro rose to $1.1258 from $1.1180.