Asian stocks fought three-week lows in the last week as oil prices knocked the shares of energy sectors lower. Many investors followed the sidelines before the meeting of the Federal Reserve next week, where the U.S. interest rates are expected to get a rise.
As the financial markets have already priced in a rate hike, it is thus obvious— given the U.S. interest rates suggested by Fed Chairperson Janet Yellen — that investors will see uncertainty about growth in China and across the world.
The broadest MSCI index of Asia-Pacific stocks outside Japan.MIAPJ0000PUS fell 1.2 percent, wiping out the gains made earlier this month, while shares of HongKong. HSIdropped by 1.8 percent.
“Beyond the increase in December, investors are concerned about the lack of demand from China, which acts as a millstone around the neck of risky assets, and most investors will remain away until they find a clearer direction on rates,” said Cliff Tan, Head of East Asian global markets at the Bank of Tokyo-Mitsubishi UFJ in Hong Kong.
Federal funds and prospective contracts FFcm1 entail an 80percent possibility that the Fed will end seven-year near-zero interest rate increase at the December meeting and an even further rate hike by March.
An “uneasy calm” prevails in the markets about the first interest rate rise in U.S. rates in nearly a decade, the Bank for International Settlements said in an observation this week.
Japan’s Nikkei .N225, however, had a different trend and rose 0.3 percent before it bounced back lower on the day with a rise in GDPby 1.0 percent compared to an earlier index of a 0.8 percent fall.
Recent data showed Chinese imports fell consecutively for 13 months with a decline of 8.7 percent in November from the previous year.
A global benchmark for oil, Brent Crude futures LCOc1 fell 5.4 percent to $40.66 a barrel Monday after the Organization of Petroleum Exporting Countries’ (OPEC) policy meeting ended without agreement on Friday to cut production.
Brent dropped below its August recess to its lowest level since February 2009, when the global economy plunged into the deepest recession since the Great Depression of the 1930s.
U.S. crude futures CLc1 dropped as low as $37.50 per barrel, also a low in almost seven years, with an effect to the energy shares in Wall Street and Asian commodity stocks.
On the currency front, the action over the China’s trade data was brief, with the Australian dollar resolving to a new intraday drop of $0.7112 AUD = D4 and decreased further from a 3-1/2 months high of $0.7386 reached on Friday.
The euro was also on the back foot. The common currency was at $1.08550 EUR =, having tripped from its one-month peak of $1.0981 set on Thursday. The yen was slightly changed at 123.11 per dollar JPY.
The Chinese Yuan in offshore CNH = D4 changed dollars in a three-month low of 6.48, despite a lower than expected by the central bank of China.
“It will be difficult for the Fed to achieve its inflation target of two percent. People’s perception of boosting consumption due to the prices fall hasn’t just come true,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.