Asian Stocks Affected by Poor U.S. Data
The Asian stocks dipped on early Wednesday. And this happened after the U.S. reported bad economic data resulting in stoked recession fears. Also, investors further soured sentiment, which already hurt by the escalation of trade dispute worries.
Aside from the Asian stocks, for the first time since 2016, the U.S. manufacturing sector shrank in August. And this was because of concerns over weakening global economy and rising trade conflict between the United States and China.
Also, on Wednesday’s Asian stocks, the MSCI’s broadest index of Asia-Pacific shares outside Japan and Japan’s Nikkei both fell slightly. Likewise, Australian stocks also dropped on Wednesday.
Then, safe-haven government bonds fared well in the wake of risk aversion in the broader markets. And the benchmark U.S. Treasury yield touched its lowest level in three years.
On Wednesday, the 10-year U.S. Treasury yielded 1.459% following its stoop of 1.429% on Tuesday, its lowest since July 2016.
Aside from Asian stocks, typically, a slump in U.S. yields weighs on the dollar. But safe-haven demand somewhat underpinned the greenback. And this demand generated through fears of a likely chaotic British exit from the European Union. However, that possibility later vanished with a setback in parliament late Tuesday for British Prime Minister Boris Johnson.
Interest Rate Cut
Meanwhile, away from the Asian stocks, U.S. President Donald Trump shot off a tweet on Tuesday pushing the Federal Reserve to boost the economy by chopping interest rates. On the other hand, Boston Fed President Eric Rosengren stated that a rate cut would be a mistake.
In addition to that, on September 18, Top Fed officials, including Rosengren, will meet to discuss whether interest rates should decline or stay as it is.
In the past month, Trump reiterated in about 34 tweets his demand that the Fed must lower the fund’s rate by a significant amount. And this was due to the rising recession fears that affected the Asian stocks. But still, the Fed remained divided about the decision of a modest rate cut.
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