Asian stocks were in retreat on Friday as the early-week optimism over interest rates did a full U-turn on hawkish signals from the US Fed.
Treasury yields weighed on sentiment after mood-dampening comments from US Fed Chair Jerome Powell dashed expectations that interest rates had peaked and cuts could be in the pipeline soon.
Overnight, Powell said he and his Fed colleagues “are not confident” that policy is yet restrictive enough to tame inflation, helping to send the 10-year US Treasury yield soaring as much as 13 basis points to 4.654%.
Also on AF: Notorious Hackers Seen Hitting US Arm of ICBC, China’s Top Bank
Japan’s Nikkei share average edged lower, tracking overnight Wall Street losses after Powell’s comments, while some heavyweight stocks including SoftBank Group slumped after disappointing earnings.
The Nikkei share average edged down 0.24%, or 78.35 points, to close at 32,568.11, while the broader Topix was ahead 0.07%, or 1.60 points, to 2,336.72. Both benchmarks gained for the week, with the Nikkei up 1.94% and the Topix rising 0.62%.
Startup investor SoftBank Group slumped 8.17%, making it the Nikkei’s biggest drag.
China stocks dropped, weighed down by liquor and auto manufacturers, as analysts await more stimulus measures to help overcome macro headwinds and lift risk appetite. Hong Kong stocks tracked their US peers lower.
Meanwhile, investors were watching closely any signs that could affect the relationship between Beijing and Washington.
US Treasury Secretary Janet Yellen began two days of meetings with Chinese Vice Premier He Lifeng on Thursday, ahead of the Asia-Pacific Economic Cooperation (APEC) summit next week.
China’s blue-chip CSI300 Index was down 0.73%, and the Shanghai Composite Index lost 0.47%, or 14.31 points, to close at 3,038.97. The Shenzhen Composite Index on China’s second exchange retreated 0.42%, or 8.10 points, to 1,903.80.
Hong Kong’s benchmark Hang Seng Index was down 1.76%, or 308.03 points, to end at 17,203.26.
Weak Treasuries Auction
Elsewhere across the region, in earlier trade, Sydney, Seoul, Singapore, Taipei, Jakarta, Wellington and Manila were also well down but Mumbai gained.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1% to a one-week low of 486.39, on track for a fourth session of losses and a weekly decline of 0.5%.
The sombre mood was set to continue as Europe woke up, with futures indicating a steeply lower open. Eurostoxx 50 futures were down 0.73%, German DAX futures dropped 0.66% and FTSE futures were 0.78% lower.
US Federal Reserve officials including Powell said on Thursday they are still not sure interest rates are high enough to finish the battle with inflation.
Powell’s comments along with a weak auction of $24 billion in 30-year Treasuries pushed yields higher, casting a shadow on equities and providing support to the dollar.
Investors have been looking for signs of US interest rates peaking after the Fed held rates steady last week, a move that bolstered speculation that the rate hiking cycle was over, leading to a short-lived rally in risky assets.
Some investors said Powell’s hawkish leaning on Thursday may have been the result of a recent loosening of financial conditions that has come as yields have tumbled in recent weeks.
Dollar Retains Gains
The three major US stock indices closed lower on Thursday, snapping the longest winning streaks for the Nasdaq and S&P 500 in two years as market optimism over looser monetary policy faded.
US rate futures have priced in about 60% chance of a rate cut at the Fed’s June 2024 meeting, according to the CME’s FedWatch tool, compared to odds of about 70% before Powell’s speech.
In the currency market, the dollar index held on to its overnight gains and was last at 105.89. The dollar stood near a one-year high at 151.40 yen and touched one-week highs against the Australian and New Zealand dollars.
US crude rose 0.38% to $76.03 per barrel and Brent was at $80.39, up 0.47% on the day. The oil market has been reeling this week on demand concerns, with a fading war-risk premium triggering a sell-off.
Spot gold was little changed at $1,956.80 per ounce and on track for their worst week in more than a month, down 1.8%, as elevated yield and stronger dollar weighed.
Key figures
Tokyo – Nikkei 225 < DOWN 0.24% at 32,568.11 (close)
Hong Kong – Hang Seng Index < DOWN 1.76% at 17,203.26 (close)
Shanghai – Composite < DOWN 0.47% at 3,038.97 (close)
London – FTSE 100 < DOWN 0.92% at 7,386.85 (0910 GMT)
New York – Dow < DOWN 0.65% at 33,891.94 (Thursday close)
- Reuters with additional editing by Sean O’Meara
Read more:
SoftBank Reveals $5.2bn Loss as WeWork Demise Adds to Woes
Country Garden ‘Aiming for $11bn Offshore Debt Plan by Year-End’
IMF Upgrades China Growth Forecasts, Warns on Property Threat
China Property Woes Drag on Hang Seng, Nikkei Lifted by Tech
