Global equities extended their rout on Monday with major European indices falling by over 2%, while the S&P500 in the US closed down by 2.6%. Asian stocks fell sharply today in response with Tokyo’s Nikkei 225 index closing 4% lower and China’s Shanghai SE Composite index down 2.5% in late Asian trading.
The latest selloff was triggered by data from China showing the biggest fall in industrial companies’ profits in four year, heightening fears of a deep slowdown. Meanwhile, the ongoing slump in commodity prices raised concerns about the health of mining companies.
The dollar extended Monday’s losses in today’s Asian session on increased risk aversion on the back of the sharp falls in equity prices. The greenback fell further below the 120 handle against the yen, dropping to 119.28 yen by late Asian session. The euro was lifted by risk-off trading and was back above the 1.12 level against the dollar, climbing to 1.1274 dollars. Against the pound, the single currency was also sharply higher, rising to 0.7431. Sterling was unable to hold on to the 1.52 handle against the dollar and was last trading at 1.5170 dollars.
Comments by several Fed officials failed to provide a clear signal on the timing of a US rate hike. San Francisco Fed President John Williams on Tuesday repeated the view by William Dudley, President of New York Fed, that interest rates are likely to go up this year. But speaking in Marquette University, Chicago Fed President Charles Evans said rates may not go up until the middle of 2016 due to the strong dollar and downward inflationary pressures.
Crude oil prices were steady in Asian trading after yesterday’s slump. WTI oil futures were slightly down at $44.41, after falling almost 3% on Monday.
Commodity currencies suffered from the global equities sell-off. The Australian dollar dropped below 0.70 against the greenback and was near three week lows at 0.6939. The Canadian dollar was also hit as it fell to a new 11-year low against the US dollar at C$1.3430.
Coming up later today, German preliminary inflation estimates for September will be watched in European trading ahead of tomorrow’s Eurozone figures, while in the US session, the Conference Board Consumer Confidence index for September will be the main data of interest. A speech by Bank of England Governor Mark Carney later today is also likely to attract some attention.