Asian stocks slipped on Monday as fears over the global outlook deepened and the likelihood of more US rate hikes loomed.
Equities in mainland China slumped to a seven-week low as Covid reared its head again and tech stocks were hit hard after Beijing’s regulators swooped, targeting tech giants Alibaba and Tencent and causing the Hang Seng Tech Index to plunge 3.9%.
Japan bucked the trend though after the country’s coalition government boosted its majority, lifting the political mood just days after the assassination of former prime minister Shinzo Abe, a dominant politician and government powerbroker.
Tokyo’s Nikkei share average advanced 1.11% to 26,812.30, after rising as much as 2% to its highest level since June 13. The broader Topix gained 1.44% to 1,914.66.
“The market was boosted by expectations for a long-term stability of Japan’s political base,” Maki Sawada, a strategist at Nomura Securities, said.
“But caution ahead of corporate earnings reports may cap gains of the Nikkei this week, and concerns over a rise in new Covid-19 cases could weigh on sentiment.”
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 1.8%, while Chinese blue chips lost 1.9% after Shanghai discovered a Covid-19 case involving a new subvariant, Omicron BA.5.2.1.
Data from China due on Friday is likely to confirm the world’s second-largest economy contracted sharply in the second quarter amid coronavirus lockdowns.
China shares tumbled as much as 1.8% and the Hang Seng Index suffered its biggest decline in a month, dropping 2.77%, or 601.58 points, to 21,124.20.
The Shanghai Composite Index dipped 1.27%, or 42.49 points, to 3,313.58, while the Shenzhen Composite Index on China’s second exchange dropped 1.47%, or 32.56 points, to 2,187.34.
Investors Brace For US Inflation Report
Elsewhere across the region, stocks in Taiwan and Philippines fell 0.9% and 0.7%, respectively. Indian stocks edged ahead with Mumbai’s signature Nifty 50 index up 0.10%, or 15.35 points, at 16,235.95.
The stock market in Singapore, and equity and currency markets in Malaysia were closed on Monday.
Globally, shares slid as investors braced for a US inflation report that could force another super-sized hike in interest rates, and the start of an earnings season in which profits will be under pressure.
The STOXX index of European shares fell 1.3%, with S&P 500 futures down 0.8% and Nasdaq futures off 0.9% as an upbeat US June payrolls report raised expectations of a 75 basis point hike from the Federal Reserve.
Bond yields and the rampant US dollar also rose, the latter hitting a 24-year peak against the yen.
Underlining the global nature of the inflation challenge, central banks in Canada and New Zealand are expected to tighten policy further this week.
Treasury Yields Climb
While Wall Street did eke out some gains last week, the market mood will be tested by earnings from JPMorgan and Morgan Stanley on Thursday, with Citigroup and Wells Fargo the day after.
Another hurdle will be Wednesday’s US consumer price report, in which markets see headline inflation accelerating further to 8.8% but a slight slowdown in the core measure to 5.8%.
An early reading on consumer inflation expectations this week will also have the close attention of the Fed.
Treasury yields climbed around 10 basis points on the jobs report and the 10-year stood at 3.09% on Monday, up from a recent low of 2.746%.
Oil prices also lost around 4% last week as worries about demand offset supply constraints.
Brent was trading down $1.27 lower at $105.76, while US crude slipped $1.43 to $103.36 per barrel.
Tokyo – Nikkei 225 > UP 1.11% at 26,812.30 (close)
Hong Kong – Hang Seng Index < DOWN 2.77% at 21,124.20 (close)
Shanghai – Composite < DOWN 1.27% at 3,313.58 (close)
New York – Dow < DOWN 0.15% at 31,338.15 (Friday close)
- Reuters with additional editing by Sean O’Meara