Asia-Pacific stocks drop on concerns over global economic growth

Asia-Pacific stocks fell on Friday following a decline in US and European equity prices over concerns for the health of the global economy.

In Japan, the Topix lost 1.8 per cent while China’s CSI-300 index of Shanghai- and Shenzhen-listed stocks shed 1.1 per cent. South Korea’s Kospi index dropped 1.5 per cent. Australia’s S&P/ASX 200 was down 1.4 per cent.

The falls in Asia came after the S&P 500 closed down 0.9 per cent and the yields on US Treasuries dropped to their lowest level since February as markets scrutinised the economic prospects for the rest of the year. 

In Asia, a resurgence of Covid-19 also remained a “key risk for the region”, said Yeap Jun Rong, market strategist at IG Group, who pointed to Japan’s announcement of a state of emergency on Thursday ahead of the Tokyo Olympics.

“This may suggest a slower recovery ahead with third-quarter GDP growth probably revised lower, but a potential economic stimulus package may provide some support for longer-term recovery ahead,” he added.

The minutes from the June US Federal Reserve meeting released on Wednesday cited “elevated” uncertainty over the economic outlook. In Asian trading on Friday, the yield on the 10-year US Treasury edged higher to 1.331 per cent after declining in the US overnight.

In China, economists have forecast gross domestic product growth for the second quarter to come in next week at 8 per cent, but investors feared the country’s rapid recovery could be losing momentum.

On Wednesday, the government signalled cuts in banks’ reserve ratio requirements, which are designed to help small- and medium-sized enterprises, though the measure depends on subsequent action from the People’s Bank of China.

Chinese data on Friday showed that consumer price inflation remained low at 1.1 per cent in June. The producer price index, which soared the most since the financial crisis in May on a global commodities rally, rose 8.8 per cent year on year.

“Compared with inflation risks, Beijing is more concerned about growth pressure,” said Jing Liu, senior economist for Greater China at HSBC.

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