Asian stock markets under pressure from interest rate and Middle East concerns

Concerns about rising interest rates and geopolitical tensions in the Middle East are weighing on Asian stock markets. In China in particular, things went down at the start of trading.

Tokyo mid-September: Photo: AP Photo/Eugene Hoshiko

Sydney, Singapore, Tokyo, Beijing. Concerns about further rising interest rates and geopolitical tensions in the Middle East pushed Asian investors onto the defensive at the start of the week on Monday. The Japanese stock market barely moved on Monday.

In Tokyo, the 225-value Nikkei index remained almost unchanged at 66,333 points.

The broader Topix was barely higher at 4135 points.

However, things fell significantly in China: the Shanghai stock exchange lost 1.9 percent to 3,815 points.

The CSI 300 index with the 300 most important Chinese companies on the mainland stock exchanges fell by 2.2 percent to 4,340 points.

In Japan, monetary policy came into focus. Minutes from the Bank of Japan's (BOJ) latest meeting showed that policymakers are considering faster interest rate hikes amid rising inflation risks. “The pace of interest rate hikes could be faster than markets expected,” a central banker said, according to the transcripts.

The persistent weakness of the yen and the rise in import prices for energy due to the Middle East conflict are driving up inflation. This causes bond yields to rise, making financing costs more expensive worldwide and particularly putting a strain on interest-sensitive technology stocks that are currently spending billions on the expansion of artificial intelligence (AI).

In China, weak economic data weighed on sentiment as industrial profit growth continued to slow in August. The clear winners included computer and electronics manufacturers, whose profits jumped 110 percent in the first eight months thanks to the AI ​​boom. The beverage industry was one of the losers with a 34.7 percent drop in profits.

A central bank adviser warned that AI could exacerbate the imbalance between strong supply and subdued domestic demand. In addition, the shift to exports poses risks in view of geopolitical tensions. “Global expansion appears to have entered a broad-based phase rarely seen in the past two decades,” said Bruce Kasman, chief economist at JPMorgan.

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In Asian currency trading, the dollar gained 0.3 percent to 157.67 yen and rose slightly to 6.72 yuan. Against the Swiss currency it lost a little to 0.83 francs. At the same time, the euro remained almost unchanged at 1.13 dollars and rose slightly to 0.94 francs. The US currency recently benefited from robust economic data and expectations that the US Federal Reserve will raise interest rates again in October. The yen remained under pressure despite the hawkish tones from the Japanese central bank.

On the raw materials market, Brent crude oil from the North Sea rose in price by 1.9 percent to $106.25 per barrel (159 liters). US oil WTI was 1.1 percent higher at $93.39. The price driver was the ongoing geopolitical uncertainty in the Middle East. US President Donald Trump rejected an Iranian peace proposal to open the Strait of Hormuz at the weekend. In addition, Iran-backed Houthi rebels continued their attacks on Saudi Arabia, maintaining concerns about supply shortages in the region.

More: Weak domestic demand slows industrial profit growth

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