Asian stocks dipped on Friday as more poor data out of China, profit-taking and a looming round of interest rate hikes all combined to dampen the mood on trading floors.
Weak factory activity data from China did, though, stoke expectations of fresh stimulus from Beijing, even as strong US economic data bolstered the view that the Federal Reserve will stay hawkish for longer.
That saw mainland China stocks as an outlier with traders betting on more state intervention but elsewhere the atmosphere was downbeat.
Japan’s Nikkei share average pared early losses to end lower, pausing a rally ahead of the corporate earnings season, while the index posted its sixth consecutive month of gains as investors bought stocks on dips.
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The Nikkei ended 0.14% lower at 33,189.04 after falling as much as 0.9% earlier in the session. For the week, the index posted a 1.24% gain, recovering from its first loss after 10 straight weeks of gains. The broader Topix ended down 0.33% at 2,288.60.
“The boom for Japanese stocks has paused for now. The rally was led by expectations of better outlook for companies but investors are not yet sure whether this is the reality,” said Jun Morita, general manager of the research department at Chibagin Asset Management.
The Nikkei hit a three-decade high earlier this month, driven by a boom in chip-related companies and inflows into trading houses after billionaire investor Warren Buffett said he was adding to investments in the sector.
But foreign investors, who led the rally, turned net sellers of Japanese equities for the first time last week after 12 straight weeks of buying.
China stocks rose as June factory activity data deepened economic worries and strengthened the case for fresh stimulus.
China’s factory activity declined for a third straight month in June and weakness in other sectors deepened, official surveys showed on Friday, adding pressure for authorities to do more to shore up growth as demand falters at home and abroad.
The Shanghai Composite Index rose 0.62%, or 19.68 points, to 3,202.06, while the Shenzhen Composite Index on China’s second exchange was ahead 1.08%, or 21.91 points, to 2,049.23. For the quarter, though, the indexes are set to drop 4.8%, and 2%, respectively.
The Hang Seng Index fell 0.10%, or 17.93 points, to 18,916.43 and was on track to slump more than 7% in the second quarter.
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Elsewhere across the region, in earlier trade, Sydney, Seoul, Mumbai, Singapore and Wellington rose but Taipei and Manila dipped.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.3% higher in choppy trading, on course to eke out a gain of just over 1% in the first half of the year.
Futures indicated European stocks were set for a higher open, with Eurostoxx 50 futures up 0.18%, German DAX futures up 0.24% and FTSE futures 0.28% higher.
Investors’ focus later on Friday will be on the US Personal Consumption Expenditures (PCE) index reading, the Fed’s favoured inflation gauge.
But before that euro zone June inflation data will likely provide cues to the broader picture in the region, after data on Thursday showed German inflation rose more than expected in June.
Data through the week has painted a picture of a resilient US economy that has eased some of the worries of an impending recession but also fired expectations that the Fed will stay on its hawkish path.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to continued labour market strength, while first quarter GDP was sharply revised upward.
Federal Reserve Chair Jerome Powell signalled on Thursday that the US central bank was likely to resume its monetary tightening campaign after a break earlier this month.
The strong economic data sent Treasury yields higher, with the yield on 10-year Treasury notes touching a three-month high of 3.868% on Thursday. It was last at 3.839%.
Yen Hits 7-Month Low
In the currency market, the yen remained in spotlight, briefly trading at 145.07 per dollar – a fresh seven-month low and breaking through the 145 barrier that analysts have been watching out for possible intervention.
When the yen breached the 145 level last September, authorities intervened in markets to support the currency for the first time in 24 years. The yen was last at 144.67 per dollar.
“The government is watching currency market moves with a great sense of urgency,” Japan’s Minister of Finance Shunichi Suzuki said. “We will respond appropriately if the moves become excessive.”
Japanese authorities are under pressure to combat a continued yen fall driven by market expectations that the Bank of Japan will keep interest rates ultra-low, even as other central banks tighten monetary policy to curb inflation.
US crude was flat at $69.87 per barrel and Brent was at $74.49, up 0.2% on the day.
Key figures
Tokyo – Nikkei 225 < DOWN 0.14% at 33,189.04 (close)
Hong Kong – Hang Seng Index < DOWN 0.10% at 18,916.43 (close)
Shanghai – Composite > UP 0.62% at 3,202.06 (close)
London – FTSE 100 > UP 0.46% at 7,506.06 (0934 GMT)
New York – Dow > UP 0.80% at 34,122.42 (Thursday close)
- Reuters with additional editing by Sean O’Meara
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