Most Asian stocks fell on Wednesday amid uncertainty over what is shaping up to be a hotly-contested U.S. presidential race, while concerns over trade saw Chinese markets hit a seven-month low.
Regional markets tracked losses in U.S. stock index futures, which fell as Vice President Kamala Harris and former President Donald Trump faced off in a fiery debate. The debate cast more doubts over the 2024 presidential race, with less than two months left to the ballot.
Wall Street indexes clocked some gains on Tuesday as technology stocks rebounded from recent losses. But U.S. stocks, along with global markets, were nursing steep losses over the past week.
Focus is also on a U.S. inflation reading due later in the day, which is likely to factor into expectations for U.S. interest rates in the coming months.
Chinese stocks at 7-mth low amid US jitters China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.2% and 0.8%, respectively, extending losses from the prior session and trading at lows last seen in early-February.
Hong Kong’s Hang Seng index slid 1.5% and was also close to a one-month low after U.S. policymakers passed a bill aimed at removing the region's trade offices from U.S. soil.
Sentiment towards China was battered by progress in a U.S. bill that plans to restrict business with Chinese biotechnology companies. The House of Representatives almost unanimously voted in favor of the bill on Monday.
Beijing criticized the bill, which still needs to pass through the Senate. But the bill presents another potential headwind for U.S.-China relations, which are already strained by the recent imposition of new, steep trade tariffs on certain Chinese industries.
Sentiment towards China was also rattled by Trump reiterating plans to impose increased trade tariffs against the country.
Japanese stocks hit by hawkish BOJ talk Japan’s Nikkei 225 and TOPIX indexes slid over 1.6% each, following more hawkish signals from the Bank of Japan.
BOJ member Junko Nakagawa said that the central bank will continue to raise interest rates, especially if inflation moves in line with its forecasts. Her comments come just a week ahead of a BOJ meeting, where investors are uncertain over another rate hike.
A 15 basis point hike by the BOJ in its late-July meeting, coupled with hawkish comments from policymakers, had battered Asian markets through August, while an unwinding of the yen carry trade also pressured global risk-driven markets.
Broader Asian stocks retreated on this notion, while a rebound from last week’s losses also proved to be fleeting.
South Korea’s KOSPI fell 0.2%, while Australia’s ASX 200 shed 0.2%.
Futures for India’s Nifty 50 index pointed to a mildly weaker open, with the index set to fall in tandem with its Asian peers.
Markets were on edge before a U.S. consumer price index inflation reading due later on Wednesday, which is widely expected to factor into the outlook for interest rates. The reading is expected to show inflation eased slightly in August.
The CPI data comes just a week before a Federal Reserve meeting, where the central bank is expected to cut interest rates by at least 25 basis points.
Diminishing expectations for a 50 bps cut had rattled stock markets last week, amid some signs of resilience in the U.S. economy.
