Asian markets were broadly down on Wednesday, tracking the end of a record streak on Wall Street as concerns lingered over the economic recovery and China’s widening crackdown on tech firms.
Oil prices briefly spiked on Tuesday before falling after the latest talks by OPEC+ crude producers fell apart, ending negotiations on a proposal to boost crude supply. US oil futures approached a seven-year peak after the talks were called off but investors quickly shifted course, selling both Brent and West Texas Intermediate futures contracts over concerns about the possible disintegration of efforts to rein in supply.
The trend in oil prices has also fanned fears about inflation, with investors worried that an overheating economy may force central banks such as the US Federal Reserve to hike interest rates earlier than thought.
“There are still concerns about what happens with the Fed tapering and there’s lack of traction on the fiscal stimulus side,” Keith Lerner, chief market strategist at Truist Advisory Services, told Bloomberg News. “Those uncertainties are just injecting some volatility and then you throw in concerns about peak economic growth. That just feeds into the concerns about – is the best growth behind us?”
Wall Street was down on Tuesday, with the Dow and the S&P 500 retreating from records and Treasury yields dropping following the release of a worse-than-expected economic indicator for the US services sector in June. Those losses carried over to Tokyo on Wednesday, while Seoul was also down. Sydney, however, rose despite concerns over coronavirus outbreaks fuelled by the Delta variant and an extended lockdown in Australia’s biggest city.
China tech crackdown fears
Shanghai closed higher but Hong Kong fell, with concerns looming about China’s crackdown on tech giants following the removal of the ride-hailing firm Didi Chuxing from app stores.
Didi shares plunged nearly 20 per cent on Wall Street on Tuesday after Chinese authorities raised national security concerns over the popular app, hinting at an expansion of oversight over tech firms after years of light-touch regulation.
“You could say that the last decade has been regulatory-free for the Chinese companies,” said Winston Ma, an adjunct professor at New York University. “Now they are entering into a new era.”
Shares in Chinese electric car maker XPeng – already listed on the Nasdaq – debuted in Hong Kong on Wednesday under the cloud of that crackdown, following a $1.8 billion IPO.
Eyes are now on the Wednesday release of the minutes from the June meeting of the Fed’s monetary policy committee – known as the FOMC – hoping to find clues about its plans as the US economy, the world’s biggest, recovers rapidly.
Eyes are now on the Wednesday release of the minutes from the June meeting of the Fed’s monetary policy committee – known as the FOMC – hoping to find clues about its plans as the US economy, the world’s biggest, recovers rapidly
“The balance of risks is slightly more negative given the continued global reach of the Delta variant and the reaction to the FOMC,” Deutsche Bank economist David Folkerts-Landau said in a report on Tuesday, according to Bloomberg News. “One of the biggest questions soon will be the extent to which governments and citizens are prepared to live with the virus. That answer will have crucial implications for the shape of the recovery and the new steady-state we’re heading to.”