AFP
Asian markets retreated yesterday after data at the weekend showed Chinese industrial output expanded in August at its slowest rate since the global financial crisis.
Wall Street provided a negative lead after another round of solid indicators fanned expectations the Federal Reserve will hike interest rates sooner than later.
The pound edged lower as investors grew jittery about Thursday’s knife-edge Scottish independence referendum, which could see the country break away from the United Kingdom.
Sydney, where several listed companies rely on Chinese business, tumbled 1.04%, or 57.6 points, to 5,473.5 and Seoul closed 0.30% lower, giving up 6.04 points to 2,035.82, while Hong Kong fell 0.97%, or 238.33 points, to 24,356.99.
However, Shanghai ended 0.31% higher, adding 7.19 points to 2,339.14 on hopes the weak data will spur the government to unveil fresh easing measures. Tokyo was closed for a public holiday.
Beijing said on Saturday that industrial production grew 6.9% last month, its weakest rate since December 2008.
The key indicator slumped from 9% growth in July and was also well short of the 8.7% median increase expected in a survey of 15 economists by The Wall Street Journal.
The figures add to worries about the world’s number two economy – a key driver of global commerce – following recent indicators suggesting growth is weakening even after limited stimulus measures.
“The (government’s) 7.5% (economic) growth target for 2014 is now clearly challenged,” Royal Bank of Scotland said, according to Dow Jones Newswires.
In foreign exchange markets the dollar consolidated its recent gains against the yen after solid reports on US retail sales and consumer confidence added to expectations the Fed will tighten monetary policy as the economy picks up.
In afternoon Singapore trade, the dollar was at 107.33 yen, from 107.31 yen in New York on Friday and at levels not seen since September 2008.
The euro fetched $1.2930, against $1.2964 Friday, while it was also at 138.80 yen, compared with 139.18 yen.
The pound bought $1.6252, down from $1.6264 after conflicting opinion polls showed the “Yes” and “No” campaigns in front days before Thursday’s referendum.
There are fears about the likely effects of Scottish independence on the British economy and the uncertainty that would cause, including to pension funds and the debt market.
Stephen Walters, chief economist at JP Morgan, Australia, said: “Uncertainty will be with us for the next couple of years as the terms of the separation are negotiated.”
He added that it was still unclear how separation would be carried out, including the monetary regime, the division of assets and liabilities, and Scotland’s EU membership.
“Should it pass, uncertainty would depress growth in the UK for a number of quarters, delay the beginning of monetary policy normalisation, and depress asset prices including the currency,” he added.
Oil prices sank. US benchmark West Texas Intermediate for October delivery eased 74 cents to $91.53, while Brent crude for October rose 39 cents to $97.50 in afternoon trade.
Gold edged higher yesterday as Asian equities tumbled but the metal continued to struggle near an eight-month low due to weak physical demand and fears the Federal Reserve may signal an early interest rate increase at this week’s policy meeting.
The Fed meeting may be pivotal as it debates a potential overhaul of its guidance on interest rates and seeks to nail down a plan for quitting its extraordinarily easy monetary policy.
Investors will parse the US central bank’s words closely for any clues on the timing of the first US rate rise in more than eight years. An announcement is expected tomorrow at the end of the two-day meeting. Any increase in interest rates would hurt non-interest-bearing gold and boost the dollar.
“The (Fed) meeting this week will dictate price action for the precious metals,” said Samuel Laughlin, a metals dealer at MKS Group. “Market consensus is for a June 2015 rate increase. However, any Fed comment hinting at an earlier rise would put further downward pressure on the metals.”
Spot gold fell to $1,225.30 an ounce, its lowest since January, early yesterday before climbing 0.4% on balance to $1,232.75 by 0627 GMT. Last week, gold fell 3% as the dollar index posted its ninth straight weekly gain.
Traders said the small gain could be due to safe-haven bids after Asian stocks fell to a five-week low due to a batch of weak data out of China.
In other markets, Bangkok fell 0.14% or 2.24 points to 1,579.12; Kuala Lumpur’s main index lost 8.34 points or 0.45% to 1,847.30; Jakarta closed up 0.02%, or 1.19 points, at 5,144.90; Singapore closed down 0.99%, or 33.08 points, to 3,312.47; Taipei was flat, edging down 5.72 points to 9,217.46; Wellington slipped 0.25%, or 13.11 points, to 5,210.86 and Manila closed 0.56% lower, giving up 40.61 points to 7,161.27.
