The weak economic data from China and Europe has sparked concerns about global economic growth, dragging down Asian stock markets on Wednesday. Additionally, the strengthening of the dollar has led investors to reassess the interest rate outlook in the United States, also exerting a certain amount of pressure on Asian risk assets.
On Wednesday morning, despite Australia's GDP for the second quarter exceeding market expectations, the Australian S&P/ASX 200 index opened down 0.55%, while the Hang Seng Index and the China CSI 300 Index opened down about 0.3%, and the MSCI Asia Pacific (excluding Japan) stock index fell 0.5% after opening.
Survey data from Tuesday showed that China's service sector activity expanded in August at its weakest pace for eight months, indicating soft consumer demand within China. Meanwhile, data released from Germany, the UK, and the Eurozone also show that manufacturing and service sector activity in Europe has declined or receded to varying degrees.
Redmond Wong, a market strategist for Greater China at Saxo Markets, stated that China's economic downturn has exceeded expectations. Despite the Chinese government adopting more proactive policies and relaxing more regulations, the effectiveness of the recent policy measures remains to be seen.
Moreover, concerns about weakening global economic growth, the strengthening of yields on U.S. 10-year Treasury bonds, and the U.S. dollar climbing to a half-year high against a basket of currencies also caused major stock markets in the U.S. and Europe to fall to varying degrees on Tuesday.
Currently, investors are digesting the latest signals that the U.S. might hike interest rates. Although Federal Reserve Governor Christopher Waller suggested that the Fed is not in a hurry to raise rates this month, recent solid economic data, particularly data related to prices, not only weakens the expectation that the U.S. economy might fall into a recession and the Fed might cut rates but also highlights the stubbornness of U.S. inflation and the pressure on the Fed to possibly raise rates further.
John Milroy, an investment adviser at Ord Minnett, mentioned that the focus is on the Fed, and recent data indicate that they have more work to do in terms of raising rates.
