SHANGHAI/NEW YORK- Asian shares fell on Thursday following a slump on Wall Street overnight, as a series of warnings from US Federal Reserve officials underscored investor worries over the resilience of the economic recovery.
US Federal Reserve Vice Chair Richard Clarida said on Wednesday that the US economy remains in a “deep hole” of joblessness and weak demand, and called for more fiscal stimulus, noting that policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2 percent.
Cleveland Federal Reserve Bank President Loretta Mester echoed Clarida, saying that the US remains in a “deep hole, regardless of the comeback we’ve seen.”
MSCI’s broadest index of Asia-Pacific shares outside Japan tumbled 1.35 percent in the morning session on broad losses across the region.
Chinese blue-chips dropped 1.09 percent, Hong Kong’s Hang Seng fell 1.72 percent, Seoul’s KOSPI sank 1.73 percent and Australian shares were 1.18 percent lower.
Japan’s Nikkei fell 0.74 percent.
“Have we overpriced the rebound in the economy? After the stern warning from Clarida, I say we have,” said Stephen Innes, chief global markets strategist at AXI.
“I think the market was interpreting a bounce from the bottom as a cyclical recovery, but I don’t think we’re there yet. I still think there’s a lot of blood on the street, especially on Main Street.”
US stocks fell on Wednesday after data showed business activity slowed in September, with gains at factories more than offset by a retreat at services industries.
Investors now await weekly data due later on Thursday, which is expected to show US jobless claims fell slightly but remained elevated, indicating the world’s largest economy is far from recovering. — Reuters