Global Courant
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During the first hour of trading on Wednesday morning, the Nikkei 225 index on the Tokyo Stock Exchange fell by more than 1.1 percent and is back below the 32,000 level. This came hours after Wall Street closed, sending the Dow Jones Industrial Average down 400 points on what was its worst day since March.
– Higher dollar and higher interest rates. That’s all that matters now, Baird market strategist Michael Anonelli told the Wall Street Journal.
Awaiting currency intervention
A stronger dollar and high interest rates don’t just affect the U.S. stock market. Asian currencies have weakened sharply this year. The Japanese currency is hovering just below 150 yen against the dollar, down from 128 in January.
– Now the currency is at a level where there may be more verbal interventions. Finance Minister Suzuki is already involved. We are close to where an intervention could take place, says ING head of analysis Robert Carnell in the morning report from Singapore.
Last fall, the central bank intervened and weakened the currency when it briefly broke through the 150 level. These are levels that the Japanese currency last experienced in the early 1990s.
The article continues below the advertisement– The pressure on the yen has increased several steps. Unless the U.S. changes course quickly, it seems increasingly likely that Japanese authorities will step in to support the yen exchange rate, as they did this time last year, says market economist Jonas Golterman of Capital Economics.
The Japanese central bank maintained a negative policy rate during last week’s interest rate meeting – despite price growth that is well above the inflation target of two percent. Central bank governor Kazuo Ueda has started preparing for changes that will take place in 2024.
– We still believe the yen will recover even if the US economy slows and the Fed moves to easing, and the Japanese central bank begins a gradual normalization, says Golterman.
Reduces Chinese growth
The International Monetary Fund said this spring that Asia, led by China and India, will account for 67.4 percent of global growth this year. The Chinese share would be 34.9 percent. Western economies would account for a total of 13.7 percent – less than the Indian economy, which was forecast at 15.4 percent.
Financial institutions lowered their Chinese growth expectations towards the end of the second quarter. Now, at the end of the third quarter, the same thing is happening again. The consensus from a Bloomberg survey shows that growth of 4.3 percent is expected in the third quarter and 4.8 percent in the last three months of the year.
HSBC, which has most of its operations in China, this week cut its growth forecast for 2023 from 5.3 percent to 4.9 percent. They join forces with Morgan Stanley and Citigroup, both of which have lowered their growth expectations to below five percent.
– The real estate market slowdown is still not over and the impact of weak international demand will continue for some time. It is important that the decision-makers do not create a sugar shock with measures. It could lead to a worsening of structural imbalances, Jing Liu, HSBC’s chief economist for China, writes in a new report.
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Chinese industrial companies achieved 11.7 percent lower profits in August than last year, new statistics showed on Wednesday morning. This is an improvement compared to July, when results fell by 15.5 percent.
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The Chinese central bank made a statement on Wednesday saying it wants to pursue a “targeted and impactful monetary policy.” This came after a quarterly meeting of the monetary policy committee.
There were also indications that macro-political adjustments will be intensified. The committee also says the central bank will promote “healthy and stable development” in the real estate market.
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Weakening of the currency and interest rate fears: growth prospects are lowered
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