By Kenan Machado
Asian shares started stronger Tuesday after their worst day in two months, but by the session’s end found themselves with modest gains at best as worries about U.S. interest-rate policy persist.
Fears of a rate increase, which have built in recent days, eased overnight following dovish comments from Federal Reserve Gov. Lael Brainard ahead of next week’s Federal Open Market Committee meeting. She said the central bank’s caution on rates “has served us well in recent months, helping to support continued gains in employment and progress on inflation.”
Comments from two other Fed officials offered hope that the central bank may hold off raising rates further at least until year-end.
But worries seeped back into the Asian market as the day progressed. After their biggest declines since late June on Monday, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -3.25% reversed to close down 0.2%, Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -3.30% ended up just 0.4% and the Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -3.67% closed up 0.3%.
Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -2.42% turned lower late in the session, finishing down 0.3% at 23230. The Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP -3.71% struggled to find direction and hovered near Monday’s close throughout the day, ending up 0.1%.
U.S. flies bombers near North Korean border
The U.S. Air Force on Tuesday conducted a low-altitude flight over South Korea in a show of force against North Korea, which last week conducted its fifth and most powerful nuclear test to date.
Rate concerns look set to return to U.S. stock trading Tuesday, with S&P 500 futures at session lows, down 15 points, after equities there rebounded Monday to their biggest gains in two months.
Castor Pang, head of research at Core Pacific Yamaichi International, said that the dovish comments from Brainard helped calm nerves, but “will not help the market recover all the losses, though.”
Some analysts point to corporate earnings in Asia picking up, and say concerns are overdone that foreign money will be pulled out of the region due to higher U.S. interest rates.
“I don’t think a rate hike will be a problem,” said Arthur Kwong, head of Asia-Pacific equities at BNP Paribas Investment Partners. A correction in global markets would be a good opportunity to buy stocks because of attractive valuations, he added.
Among individual stocks, Samsung Electronics Co. /zigman2/quotes/209800866/delayed KR:005930 -3.04% /zigman2/quotes/202367843/delayed SSNLF 0.00% rebounded 4.2% after recording its worst day in four years Monday. Fellow South Korean firm Hanjin Shipping Co. ended 0.8% higher after the first of its stranded U.S.-bound vessels began off-loading containers in California on Monday.
Japanese chip maker Renesas Electronics Corp. /zigman2/quotes/203872935/delayed JP:6723 -7.00% rose 2.2% following an agreement to buy U.S. peer Intersil Corp. for $3.2 billion. The gain came despite concerns about the hefty price of the deal and Renesas’ ability to establish itself as an industry leader in fields such as self-driving cars.