Asian equities edged ahead on Friday with optimism over China’s post-Covid recovery lifting traders’ mood but those gains were capped as investors braced for crucial US jobs data later in the day.
Japan’s Nikkei and mainland China shares all ended the week in the green but Hong Kong’s Hang Seng slipped, with profit-takers dragging down its tech stocks.
The jobs figures from the US will provide clues as to how aggressive the Federal Reserve will be in its tightening policy going forward – and that nervousness fed into the region’s bourses with many traders holding back.
Tokyo’s Nikkei share average reversed early losses to end higher, as investors bought back beaten-down stocks with the yen weakening against the dollar.
The Nikkei rose 0.59% to close at 25,973.85, after opening lower following Wall Street’s weak finish overnight. The index lost 0.46% for the holiday-shortened week. The broader Topix index was up 0.37%, or 6.86 points, to 1,875.76.
Wall Street’s main indexes had lost more than 1%, with the Nasdaq leading the declines, as evidence of a tight labour market eroded hopes that the Federal Reserve could pause its rate hike cycle anytime soon as it stays focused on taming inflation.
China stocks logged a five-day winning streak on investors’ expectations that the economy would soon emerge from its Covid woes and stage a robust recovery in 2023.
Foreign investors bought a net 20 billion yuan ($2.9 billion) of Chinese stocks via the Stock Connect Scheme this week, the biggest weekly purchase amount since December 2.
China’s blue-chip CSI 300 Index closed up 0.3%, while the Shanghai Composite Index rose 0.08%, or 2.42 points, to 3,157.64
The Hang Seng Index dropped 0.29%, or 60.53 points, to 20,991.64 but the Shenzhen Composite Index on China’s second exchange edged up 0.17%, or 3.38 points, to 2,040.53.
For the week, the CSI 300 Index gained 2.8%, while the Hang Seng benchmark advanced 6.1% to touch a six-month high.
Wall Street Sell-Off
Elsewhere across the region, South Korea’s Kospi jumped 0.77% and Australia’s stock benchmark was 0.56% higher. Indian stocks retreated with Mumbai’s signature Nifty 50 index down 0.71%, or 127.95 points, at 17,864.20.
MSCI’s broadest index of Asia-Pacific shares added 0.29%, putting it on track for a 1.55% advance for the first week of 2023, its best weekly performance in a month.
Wall Street’s sell-off came amid worries that a robustness in the jobs market would keep the Fed raising rates for longer, after data released on Thursday showed a bigger than expected rise in private payrolls and a drop in jobless claims.
“There is concern that the labour market isn’t showing any signs of cooling,” putting financial markets “very much on edge”, said Tony Sycamore, a market analyst at IG. “But the important one is going to be tonight.”
According to a Reuters survey of economists, non-farm payrolls are forecast to show on Friday that 200,000 jobs were created in December, easing from November’s 263,000 pace.
US two-year Treasury yields spiked to a more than two-month high of 4.497% overnight but eased to 4.460% in Tokyo. The 10-year yield, which rose as high as 3.784% in New York, dropped to 3.726%.
Dollar Index Bounceback
The US currency remained elevated versus major peers on Friday. The dollar index, which measures the greenback against six counterparts including the euro and yen, was trading little changed at 105.11 after jumping 0.91% overnight and touching 105.27 for the first time since December 8.
The dollar index is up 1.57% this week, putting it on course to snap a streak of three losing weeks. It is shaping up for the best performance since late September.
The greenback added 0.27% to 133.755 yen, taking it back towards Thursday’s one-week high of 134.045.
Crude oil rose, extending gains from Thursday after data showed lower fuel inventories.
Brent crude futures were last 79 cents, or 1%, higher at $79.48 a barrel. US West Texas Intermediate crude futures were up 80 cents, or 1.1%, at $74.47 a barrel.
Tokyo – Nikkei 225 > UP 0.59% at 25,973.85 (close)
Hong Kong – Hang Seng Index < DOWN 0.29% at 20,991.64 (close)
Shanghai – Composite > UP 0.08% at 3,157.64 (close)
London – FTSE 100 > UP 0.15% at 7,644.56 (0935 GMT)
New York – Dow < DOWN 1.02% at 32,930.08 (Thursday close)
- Reuters with additional editing by Sean O’Meara