HONG KONG, Aug. 19 (Reuters) – Asian stocks fell on Thursday as the dollar hit multi-month highs against its peers, after minutes from the latest U.S. central bank meeting showed the growing prospect a reduction in monetary stimulus this year.
The largest MSCI Asia-Pacific equity index outside of Japan (.MIAPJ0000PUS) fell 0.63%, coming back to the 2021 lows set last month, with Chinese blue chips (.CSI300) in down 0.21%, Australia (.AXJO) down 0.54% and Hong Kong 0.45%.
The Japanese Nikkei (.N225) lost 0.37%.
Carlos Casanova, senior economist for Asia at UBP, said the main market drivers this week were weaker economic activity data in China, which had prompted many economists to downgrade their forecasts, the situation in Afghanistan and the Fed minutes.
The July policy meeting minutes released on Wednesday fleshed out the Fed’s thinking about when to cut its monthly bond purchases and showed officials expected they could ease the stimulus this year if the economy continues to improve.
However, officials noted that the spread of the COVID-19 Delta variant could temporarily delay the full reopening of the economy and constrain a labor market that looms large in the Fed’s thinking. Read more
“The minutes show a Fed that is quite divided on most things, but recognizes that we are getting a lot closer to the point of reduction,” ING analysts wrote in a note.
Attention now turns to the Fed’s annual research conference in Jackson Hole, Wyoming, next week for any reading on the central bank’s next steps.
“We will have more visibility on the outlook for US 10-year yields from September, there are upside risks that they could drop from 1.6% to 1.8% from current levels, and for Asia-Pacific means exits, ”Casanova said.
US Treasury yields were little changed in Asian trading. The 10-year benchmark was last at 1.2617% after hitting 1.300% before the minutes were disclosed.
However, the greenback reacted more strongly with the dollar index, which measures the currency against the euro, yen and four other rivals, climbing to 93.347, its highest since April 1.
Gains were particularly strong against risk-prone currencies, and the dollar hit nine-month highs against the euro and the Australian and New Zealand dollars.
Wall Street closed lower after the minutes with the Dow Jones Industrial Average (.DJI) ending the day down 1.07%, while the S&P 500 (.SPX) lost 1.07% and the Nasdaq Composite ( .IXIC) fell 0.89%.
The stronger dollar trailed gold. The spot price fell 0.15%.
Oil extended its losses into a sixth day on Thursday, hovering near three-month lows. ANZ analysts said rising inventories in the United States fueled fears of weaker demand amid a spike in COVID-19 cases around the world. 0 / R
Brent crude fell 85 cents or 1.3% to $ 67.38 per barrel, US West Intermediate crude lost 1.4% to $ 64.53 per barrel.
Report by Alun John in Hong Kong. Additional reporting by Pete Schroeder in Washington; Editing by Sam Holmes
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