Asia Stocks Retreat on US Inflation Fears But Nikkei Advances

 

Asia stock indexes slipped on Friday as investors continued to fret over the US’s inflation fight while in China worries over its post-Covid recovery and the ‘spy balloon’ fallout also weighed.

The outlier was Japan where shares traded higher despite an overnight rout on Wall Street as US Treasury bond yields made gains, signalling the possibility of further rate hikes.

A weaker yen boosted exporters’ fortunes and that saw the index benefit from an early lift but later reports that the Japanese government plans to appoint Kazuo Ueda, an economist and former member of the BOJ Policy Board, as the central bank’s next governor created some turbulence.

 

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Most analysts said the appointment of the 71-year-old was totally unexpected – he was not even considered a dark horse candidate – and it was hard to tell immediately what that meant for any changes in the bank’s near-term monetary policy.

But, nevertheless, the yen strengthened with investors betting he could phase out Japan’s super-low interest rates sooner than expected, capping the index’s early gains.

The Nikkei share average edged up 0.31%, or 86.63 points, to close at 27,670.98, while the broader Topix was ahead 0.10%, or 1.96 points, to 1,986.96.

The market was also supported by chip-related shares such as Tokyo Electron, which soared 4.97% to 48,560 yen after lifting its annual net profit and sales forecasts.

China and Hong Kong stocks fell, weighed down by rising Sino-US tensions, waning excitement over its post-Covid recovery, and cooling interest in ChatGPT-concept stocks.

The United States will explore taking action against entities connected to China’s military that supported the flight of a Chinese spy balloon into US airspace last week, a senior State Department official warned on Thursday.

China’s tech-focused STAR Market dropped 1.2%, while Hong Kong’s Hang Seng Tech Index slumped 4.7%, amid media reports that the Joe Biden administration is poised to introduce new restrictions on US companies funding the development of advanced computing technologies in China.

 

China Factory Gate Prices Drop

Meanwhile, data released on Friday showed that China’s January factory gate prices fell more than economists expected, suggesting that flashes of domestic demand – that had stoked consumer prices after the zero-Covid policy ended – are not yet strong enough to rekindle upstream sectors.

The Shanghai Composite Index fell 0.30%, or 9.71 points, to 3,260.67, while the Shenzhen Composite Index on China’s second exchange edged down 0.44%, or 9.49 points, to 2,164.72.

The Hang Seng Index dropped 2.01%, or 433.94 points, to 21,190.42.

Elsewhere across the region, Sydney, Seoul, Singapore, Taipei and Jakarta sank while Indian stocks fell too with Mumbai’s signature Nifty 50 index down 0.21%, or 36.95 points, at 17,856.50.

MSCI’s broadest index of Asia-Pacific shares sank 0.91% and was on course for a 1.36% weekly decline, after losing 1.16% in the previous week.

 

US Price Data Due

US equity futures slipped 0.12%, after the S&P 500 sank 0.88% overnight. German DAX futures pointed to a 0.9% decline at the restart, and UK FTSE futures signalled a 0.44% loss.

Investor focus is now trained on crucial US consumer price data due Tuesday.

The two-year Treasury yield eased slightly to around 4.49% in Tokyo, after touching the highest since January 6 at 4.514% overnight. The 10-year yield edged down to around 3.67% after bumping around 3.96% mid-week, also the highest since January 6.

The US dollar index, which measures the greenback against six peers including the euro and yen, ticked up slightly to 103.27, sticking to the middle of its range this week. It touched 103.96 on Tuesday for the first time since January 6 as well.

Meanwhile, crude oil prices dipped on Friday but were headed for a weekly gain with the market continuing to seesaw between fears of a recession hitting the United States and hopes for strong fuel demand recovery in China, the world’s top oil importer.

Brent crude futures declined 35 cents, or 0.4%, to $84.15 a barrel, while US West Texas Intermediate crude futures slipped 41 cents, or 0.5%, to $77.65 a barrel.

 

Key figures

Tokyo – Nikkei 225 > UP 0.31% at 27,670.98 (close)

Hong Kong – Hang Seng Index < DOWN 2.01% at 21,190.42 (close)

Shanghai – Composite < DOWN 0.30% at 3,260.67 (close)

London – FTSE 100 < DOWN 0.16% at 7,898.38 (0935 GMT)

New York – Dow < DOWN 0.73% at 33,699.88 (Thursday close)

 

• Reuters with additional editing by Sean O’Meara

 

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