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What’s happening: Asian equity markets remained under pressure for the fourth consecutive trading session on Monday.
What happened: Mirroring the steep decline in the US stock market on Friday, Asian markets began the week on a negative note.
Asian stocks ended Monday’s trading session lower, with China and India leading the decline.
Why it matters: Strength in the US dollar has been weighing on stock markets around the globe. Although the US dollar index, which measures the greenback’s performance versus a basket of major peers, declined by 0.53% to 105.60 on Monday, it has still gained more than 4% over the past three months.
Concerns around geopolitical tensions in the Middle East clouded market sentiment on Monday.
The decline in Chinese stock indices to their pre-pandemic levels also weighed heavily on other Asian equity markets. Despite several measures by Chinese authorities over the past three months, risk sentiment remained subdued on concerns surrounding the country’s slowing economic growth.
Reports of defaults on US dollar debt by Chinese real estate developers and the country’s worsening relations with the US further dampened risk sentiment. Traders also shorted Chinese stocks on news of the China-listed arm of Foxconn Technology Group on news of government investigations into the company’s facilities in the country.
China and India were the worst performers on Monday. China’s Shanghai ended lower by 1.47% at 2,939.29, while India’s Sensex lost 1.26% to settle at a three-month low of 64,571.88.
The Asia Dow lost 0.75% to end at 3,236.60, while Japan’s Nikkei 225 declined by 0.83% to 30,999.55 and Hong Kong’s Hang Seng shed 0.72% to close at 17,172.13 on Monday.
What to watch: Investors will continue monitoring economic data releases from China as well as the Fed’s upcoming interest rate moves, which will determine the fate of the US dollar. Markets will also stay tuned in to news related to the ongoing geopolitical unrest in Israel and Ukraine.
Context: Gold prices eased on Monday, as traders took profit after a three-week rally.
Details: Gold had been on a losing streak in the third quarter and entered October at around a seven-month low.
The yellow metal reversed the trend and climbed for three weeks, mainly on news of geopolitical unrest and concerns around the risk of stagflation (high and sticky inflation combined with a stagnant economy), despite rate hikes by central banks around the world.
Gold has staged a three-week rally this month, despite an increase in the US 10-year Treasury yield. Higher Treasury yields typically exert pressure on the yellow metal, as it makes the non-yielding bullion less attractive for investors.
Projections of gold purchases by central banks next year, as policymakers follow an easing monetary policy stance, also lent support to the yellow metal.
Reports of the Chinese government’s intention to authorise more than 1 trillion yuan in additional sovereign debt issuance also lent support to gold.
Gold for December delivery fell $6.60 to $1,987.80 an ounce on Monday. In other metals trading, silver for December delivery lost 29 cents to settle at $23.21 an ounce and December copper added 2 cents to reach $3.59 a pound.
What to watch: Investors await economic data on Canada’s new home prices, UK’s manufacturing optimism, and the S&P Global manufacturing PMI for the US today. Markets will also watch whether China’s standing committee of the National People’s Congress (NPC) gives its approval for the extra debt issuance proposed by the government.
Other Markets: US trading indices closed mostly lower on Friday, with the Dow Jones index and S&P 500 down by 0.58% and 0.17%, respectively, and the Nasdaq 100 up by 0.27%.
Ukraine said it had shot down 14 attack drones fired by Russia in different regions of the country. Despite the ongoing tensions, the safe-haven US dollar index declined slightly this morning.
South Korea’s producer price inflation decelerated to 0.4% in September, from 0.9% in the previous month, lending support to the KRW/USD forex pair.
Australia’s Manufacturing PMI fell to 48 in October, from 48.7 in the previous month. This being the eighth successive month of deterioration in business conditions and the lowest figure in six months sent the AUD/USD pair lower in forex trading this morning.
Japan’s Manufacturing PMI came in at 48.5 in October, unchanged from September’s seven-month low figure. This also marked the fifth straight month of decline in operating conditions in Japan and exerted pressure on the JPY/USD forex pair.
Thailand reported a trade surplus of $2.10 billion in September, compared to a deficit of $0.85 billion in the year-ago month. The figure also came above market expectations of a surplus of $0.49 billion, which sent the THB/USD pair higher in forex trading this morning.
Chile’s producer price index, Egypt’s current account balance, Hungary’s deposit interest rate, Mexico’s inflation rate, US’s Richmond Fed manufacturing index and services index, API’s crude oil stock change and ECB President Lagarde’s speech.
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