Asian markets were mostly lower on Friday on growing fears of another interest rate hike by the Federal Reserve and deepening worries about China's economy, with the country's asset crisis again adding another layer of risk.
Equity traders around the world were spooked this month by recent data that suggested that while U.S. inflation is falling, the economy remains strong and prices could remain flat for some time.
That led to a reassessment of the monetary policy outlook, with optimism that July's rate hike could be the last, giving way to bets on more before the end of the year.
This view has been supported by some decision-makers at the central bank, who have suggested that its two percent inflation target can only be reached and maintained by raising the cost of borrowing. Inflation currently stands at 3.2 percent.
Expectations of more Fed hikes pushed 10-year Treasury yields — a measure of future rates — near their highest levels since the global financial crisis.
Thursday's data did little to deter investors, with jobless claims falling the most since last month, suggesting the labor market remains in rough health.
The Fed said the softening of the jobs sector was key to reducing inflation.
"This week's data gave them no reason to let their guard down," said Mike Loewengart of the Morgan Stanley Global Investment Office.
"With housing starts, retail sales and jobless claims bolstering the picture of a robust economy, another rate hike cannot be ruled out even if the Fed remains on hold next month."
Fed chief Jerome Powell's speech at the annual Jackson Hole Economic Symposium in Wyoming will be closely watched to see what the bank's plans are.
All three of Wall Street's major indexes fell for a third straight session on Thursday, while London, Paris and Frankfurt also suffered big losses.
Most major Asian markets were in the red, including Hong Kong, which fell for a sixth straight day.
Investors are also anxiously watching China, where authorities are struggling to rein in the economy as it recovers from Covid.
The country's property crisis has also hit the headlines again, with big names and heavily indebted firms in danger of going under.
On Thursday, Evergrande Group - considered the poster child for the drama - filed for bankruptcy protection in the United States, a measure that protects its American assets while it tries to push through a restructuring.
It comes days after Country Garden said there were "significant uncertainties surrounding the repayment of corporate bonds", suggesting it could default next month.
Meanwhile, there are now concerns about government-backed real estate firms, with Bloomberg reporting that many are warning of widespread losses.
It said 18 of 38 state-owned builders traded in Hong Kong and China posted preliminary losses in the first half of the year, compared with 11 that warned of full-year losses in 2022.
"The slowdown in Chinese property is already hurting all developers, including large government-linked ones," said Zerlina Zeng of CreditSights Singapore.
"We don't expect the situation to improve significantly in the second half."
Key figures around 03:00 GMT
Tokyo - Nikkei 225: DOWN 0.2 percent to 321,565.21 (pause)
Hong Kong - Hang Seng Index: POLE 0.7 percent to 18,193.89
Shanghai - Composite: UP 0.1 percent to 3,167.36
Euro/Dollar: UP to $1.0885 from $1.0878 on Thursday
Pound/Dollar: UP to $1.2753 from $1.2745
Euro/pound: UP to 85.36 pence from 85.29 pence
Dollar/yen: DOWN to 145.52 from 145.79 yen
West Texas Intermediate: up 0.4 percent to $80.69 a barrel
Brent North Sea crude: up 0.2 percent to $84.31 a barrel
New York - Dow: POLE 0.8 percent to 34,474.83 (close)
London - FTSE 100: POLE 0.6 percent to 7,310.21 (close)
In this latest market update, the global financial environment is witnessing further declines as traders struggle to overcome lingering uncertainty over rates and looming concerns over China's economic outlook. Expert analysis delves into the factors driving these market swings and offers insight into potential strategies for investors navigating this challenging environment.
Main advantages:
Ongoing Struggle: Markets again face significant downside as traders grapple with uncertainty surrounding interest rates and their impact on investment decisions.
China impact: The lingering gloom over China's economic performance continues to cast a shadow over global markets, adding to prevailing concerns among investors.
Expert Insights: Distinguished financial analysts provide a comprehensive assessment of the interrelated factors driving this market decline and shed light on the potential implications for various asset classes.
Volatility Management: Faced with these challenging market conditions, investors are advised to consider diversified portfolios and thoughtful risk management strategies to effectively manage increased volatility.
Stay informed with our in-depth analysis as we delve into the complexities of the current market downturn, shed light on the role of interest rates and lingering China-related concerns. Our expert insights aim to equip investors with the knowledge needed to make informed decisions in these turbulent times.
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As markets face renewed turbulence, traders find themselves in a challenging position as they try to navigate the complex environment of fluctuating interest rates and lingering uncertainties stemming from China's economic situation. This article will delve into the factors contributing to the recent market slump and shed light on the issues traders are currently facing.
Unpacking the rate conundrum:
The latest market decline can be attributed in part to the ongoing struggle to stabilize interest rates. Traders face the difficult task of gauging the potential impact of rate adjustments on various sectors, causing increased volatility. Understanding the subtle relationship between rates and market sentiment is essential to deciphering the current situation.
Lingering China Gloom:
The lingering cloud of uncertainty surrounding China's economic performance continues to cast a shadow over global markets. As traders monitor developments in the world's second-largest economy, concerns about trade tensions, regulatory shifts and growth prospects are contributing to a prevailing sense of caution. Insight into China's evolving economic environment is essential for market participants seeking stability.
Impact on investor sentiment:
The combined effect of interest rate uncertainties and China's economic woes led to a perceptible shift in investor sentiment. Confidence fluctuates as traders face difficult decisions amid unpredictable market conditions. Analysis of domino effects on investor behavior provides valuable insights into the current trajectory of the market.
Navigating the way forward:
Amid the prevailing challenges, marketers need to adopt a strategic approach to weather the storm. Diversification, rigorous risk assessment and staying in tune with evolving economic indicators are essential tactics for traders looking to mitigate losses and capitalize on potential opportunities. An informed view of potential strategies can help traders make more informed decisions.
The recent market decline, driven by traders' struggles with interest rates and lingering China-related uncertainties, underscores the tangled web of factors affecting global markets. While challenges remain, proactive and strategic measures can enable marketers to navigate these tumultuous times more effectively. Staying informed and adaptable remains key as the financial landscape is constantly evolving.
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