camila October 5, 2021

SYDNEY (BLOOMBERG) – A global sell-off in stocks continued in Asia on Tuesday (Oct 5) amid concern that surging prices for raw materials such as crude oil will stoke inflation and sap economic momentum.

Shares tumbled in Japan, South Korea and Australia. United States futures stabilised after the S&P 500 overnight retreated to the lowest since July and the Nasdaq 100 shed more than 2 per cent, dragged down by tech giants like Amazon.com and Facebook. The energy sector was among the few to rise in the US session.

Japan’s Nikkei 225 dropped 3.39 per cent, while South Korea’s Kospi shed 2.57 per cent. The Hang Seng index in Hong Kong dropped 1.42 per cent.

Singapore’s Straits Times Index was down 1.19 per cent as at 9.45am local time.

Shares in Australia also slipped, with the S&P/ASX 200 down 1.01 per cent. The Reserve Bank of Australia is set to announce its interest rate decision before midday on Tuesday.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.29 per cent lower.

Markets in mainland China are shut until Friday for the Golden Week holidays.

Ten-year US Treasury yields held a climb toward 1.5 per cent and the US dollar remained lower. Oil in New York reached the highest since 2014 following Opec+’s decision to maintain a gradual supply hike even as a natural-gas crisis boosts crude demand. The Bloomberg Commodity Spot Index soared to an all-time peak.

China’s indebted property sector continues to vex traders. Fantasia Holdings Group did not repay a US$205.7 million (S$279 million) bond that was due on Monday, adding to the strains of the nation’s heavily leveraged property firms following industry giant China Evergrande Group’s debt woes.

Global stocks have dropped more than 5 per cent from a record early last month, hurt by a looming reduction in Federal Reserve stimulus, spiralling energy costs and the possibility of slower growth in China due to Beijing’s property sector crackdown. US lawmakers are also continuing their brinkmanship over the nation’s debt ceiling, with US President Joe Biden warning that the government is at risk of breaching the legal limit this month.

“We think there is going to be more volatility in these markets,” State Street macro strategist Emily Weis said on Bloomberg Television. “It’s not going to be the same sort of ‘risk-assets-always-go-up-over-time’ story that maybe happened in the rebound from Covid-19.”

In the latest Fed comments, St. Louis president James Bullard said elevated price pressures may be changing the mentality of businesses and consumers by making them more accustomed to higher inflation.

Elsewhere, Bitcoin was around US$49,000, making a push back toward US$50,000 for the first time since El Salvador’s troubled roll-out of the largest cryptocurrency as legal tender at the start of last month.