Asia market trends Wednesday: Economic growth concerns set to weigh shares

Singapore subway MRT escalator at One North; taken August 2018.Singapore MRT escalator at One North.

Concerns over slowing economic growth were set to weigh Asian markets on Wednesday, after dunking Wall Street on Wednesday amid weak home sales data.

In the U.S., existing home sales dropped to the lowest levels in three years in December, down 6.4 percent, according to National Association of Realtors data.

Chris Rupkey, chief financial economist at MUFG Union Bank, said in a note on Tuesday that the decline was likely partly on a winter-weather effect, but the overall trend over the past few months shows a loss of confidence by homebuyers.

“You don’t buy the biggest big-ticket purchase of your life when the markets are plummeting and scaring the daylights out of consumers,” he said.

He also pointed to higher interest rates. “Right now, home sales are the smoking gun that the Fed’s rate hikes are starting to bite and slow the broader economy down,” he said.

But Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management, noted that U.S. market futures had pointed down even before the data’s release and pointed instead to the interminable U.S. government shutdown.

“With the U.S. government shutdown going on for 32 days, the cost to the economy could exceed US$5 billion and the economic impact will be more significant than past years as furloughed employees with no paychecks struggle to make ends meet,” she said in a note on Tuesday. She also noted that it has delayed economic data releases which might have confirmed a slowing economy.

In addition, sentiment may have been dampened by a Financial Times report, citing people briefing on the talks, that the Trump administration had rejected China’s offer for preparatory trade talks this week; however, that was later denied by a White House adviser.

Broader concerns over the impact of slowing growth in China may also weigh Asia markets on Wednesday.

“Weaker growth in China is already weighing on exports from the rest of Asia, and a further slowdown in the economy is one of the biggest risks clouding the outlook for the rest of the region,” Gareth Leather, senior Asia economist at Capital Economics, said in a note on Tuesday.

Indexes

Japan’s Nikkei 225 index was down 0.71 percent in early trade after ending at 20,622.91 on Tuesday, down 0.47 percent.

In the U.S., the Dow Jones Industrial Average lost 1.22 percent to 24,404.48 on Tuesday, the Nasdaq Composite dropped 1.91 percent to 7020.36 and the S&P 500 shed 1.42 percent to 2632.90. Futures for the three indexes were a tad higher in early trade.

Singapore’s Straits Times Index fell 0.87 percent to 3192.71 on Tuesday; January futures for the index were at 3192 on Tuesday, while February and March futures were at 3195 and 3192 respectively.

Hong Kong’s Hang Seng Index lost 0.70 percent to 27,005.449 on Tuesday, while China’s CSI 300 index was down 1.33 percent at 3143.317.

Malaysia’s KLCI was up 0.59 percent at 1702.12 on Tuesday, while Indonesia’s IDX Composite rose 0.27 percent to 6468.56.

Oil

Nymex WTI crude oil futures for March were down 2.29 percent at US$52.57 a barrel at 3:29 A.M. SGT, while ICE Brent crude futures for March were off 1.98 percent at US$61.50 a barrel at 6:59 A.M. SGT, according to Bloomberg data.

 

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