Asia stocks stagger into September as dollar spikes

Asian stocks slid and the dollar spiked on Thursday as investors greeted September by selling everything that was not nailed down after a month battered by concerns about aggressive rate hikes from global policymakers, Reuters reported.

The sell-off looks set to hit European markets, with the pan-region Euro Stoxx 50 futures STXEc1 falling 0.9%, German DAX futures FDXc1 down 0.86% and FTSE futures FFIc1 0.64% lower. S&P 500 futures ESc1 dropped 0.7%, while Nasdaq futures NQc1 declined 1.2%.

This month, both the U.S. Federal Reserve and the European Central Bank are expected to raise borrowing costs aggressively. Data overnight showed euro zone inflation had risen to another record high last month, solidifying the case for a 75 basis point (bps) rate hike from the ECB next week.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slumped 1.6% to the lowest in six weeks, as risk sentiment took a turn for the worse.

Japan’s Nikkei .N225 skidded 1.7% and Hong Kong’s Hang Seng index .HSI fell 1.5% while Chinese blue-chips .CSI300 eked out a 0.1% gain, anchored by hopes for more economic stimulus from Beijing.

Regional purchasing managers’ indexes from South Korea, Japan and China on Thursday all pointed to slowing global economic activity as rising interest rates, high inflation, the war in Ukraine and China’s COVID curbs took a heavy toll.

“August has been a terrible month for balance fund investors with no diversification gains from holding a portfolio of equities and bonds,” Rodrigo Catril, senior FX strategist at National Australia Bank, said in a note to clients.

“Month end yields no surprises, but rather an extension of the major themes seen during August with further increases in core global bond yields and weaker equities.”

Overnight, Cleveland Fed President Loretta Mester said the U.S. central bank would need to boost interest rates somewhat above 4% by early next year and hold them there in order to bring inflation back down to the Fed’s goal, and that the risks of recession over the next year or two had moved up.

U.S. stocks ended the month with the worst August performance in seven years. For the month, the Dow Jones Industrial Average .DJI fell 4.06%, the S&P 500 .SPX 4.24% and the Nasdaq .IXIC 4.64%.