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.

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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.

While Clarida and other Fed officials have called for more fiscal assistance in boosting the economy, analysts say immediate support is unlikely with the US Congress locked in a stalemate. Additionally, a second wave of coronavirus infections in Europe threatened the economic recovery in that region pushing equities lower and propping up the safe-haven dollar.

On Wednesday, the Dow Jones Industrial Average fell 1.92 percent, the S&P 500 lost 2.37 percent and the Nasdaq Composite dropped 3.02 percent.

In the currency market, the dollar eased from two-month highs touched on Wednesday. The dollar index, which measures the greenback against a basket of peers, was a touch lower at 94.348 but edged up against the yen to 105.41. The euro ticked up to buy USD 1.1664.

”A stronger USD remains a significant headwind for commodity markets, with investor appetite waning,” ANZ analysts said in a note. Spot gold, which hit a two-month low early in the Asian day on the stronger greenback, was flat at USD 1,863.61 per ounce by mid-morning in Asia.

Oil prices fell amid uncertainty about demand due to pandemic-related travel restrictions. Brent crude dropped 0.89 percent to USD 41.40 a barrel and US West Texas Intermediate crude was 1.15 percent lower at USD 39.48 a barrel.

US Treasury yields were little changed, with the 10-year yielding 0.6757 percent from 0.676 percent on Wednesday, and the 30-year yield at 1.4168 percent from 1.425 percent.

First Published:Sept 24, 2020 8:18 AM IST