Asian markets slide between holidays in Japan, China and South Korea; Hong Kong hits at 11-month lows

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The broader MSCI index of Asia Pacific equities outside of Japan fell another 1.4 percent

Asian equities slid and the dollar held steady Monday before a packed week of no less than a dozen central bank meetings, highlighted by the Federal Reserve likely to take another step towards tapering. Holidays in Japan, China and South Korea created precarious conditions and politics added further uncertainty with elections in Canada and Germany closing the week.

The fate of Chinese real estate giant Evergrande and its $ 300 billion in liabilities also hangs in the balance with a bond interest payment due Thursday.

Concerns about the health of the Chinese economy and Beijing’s crackdown on tech companies continue to haunt the region, with Hong Kong shares falling more than 3% to a low in nearly 11 months.

The broader MSCI index of Asia Pacific stocks outside of Japan fell another 1.4 percent, after losing 2.5 percent last week, with Australia down 1.5 percent.

The Japanese Nikkei was closed, but futures were 400 points below Friday’s close. The market could consolidate after climbing to a 30-year high in hopes that a new Prime Minister will bring more stimulus and political changes.

Nasdaq futures fell 0.5% and S&P 500 futures fell 0.3%, with Wall Street closing last week on a weak note following disappointing US consumer confidence data.

The Fed is still expected to lay the groundwork for a tapering at its policy meeting on Tuesday and Wednesday, although the consensus is that an actual announcement will be postponed to meetings in November or December.

10-year Treasury yields hit a two-month high and the curve flattened before the meeting.[US/]

“A flatter yield curve suggests some fears that the Fed may exaggerate any bullish cycle,” cautioned Tapas Strickland, NAB’s chief financial officer.

He noted that only 2-3 FOMC members would need to shift their dot plot predictions for an increase in 2022 to make it the median, as seven out of 18 had already made a move next year.

“The Fed will also have points for 2024 that will give an indication of the slope of the potential excursion cycle.”

The market consensus is for two hikes in 2023 and four in 2024 with the long-term federal funds rate seen at 2.125 percent.

Central banks of the EU, Japan, UK, Switzerland, Sweden, Norway, Indonesia, Philippines, Taiwan, Brazil, South Africa, Turkey and Hungary all have meetings this week .

Norges Bank is expected to be the first in the G10 to raise interest rates.

The higher US yields combined with general risk aversion to the benefit of the dollar, which rose near a one-month high of 93.303 on a basket of currencies.

The firmer dollar weighed on gold, which was stuck at 1,749 an ounce after losing 1.9% last week.

Oil prices fell as energy companies in the US Gulf of Mexico restarted production after consecutive hurricanes in the region shut down production.

Brent crude fell 54 cents to 74.80 a barrel, while US crude fell 57 cents to $ 71.40.

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