Asian markets were in cautious mood on Friday, with investors preoccupied by the gloomy global picture, particularly the threat of continuing rate hikes in the US and Covid’s persistence in China.
The US Federal Reserve fired more warning shots on interest rates ahead of the opening of Asian markets, while rising coronavirus cases in China and liquidity strains in its bond market added to the uncertainty.
The US S&P 500 fell overnight after a Federal Reserve Bank president warned more interest rate hikes would be necessary.
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That saw Japan’s Nikkei share average close lower, hurt by declines in growth shares amid higher long-term bond yields, sending the benchmark to its first weekly loss in four.
The Nikkei ended 0.11% lower at 27,899.77, reversing small gains from earlier, as data showed inflation running at a 40-year high as a weak yen stoked import costs. For the week, the index lost about 1.3%.
The broader Topix eked out a 0.04% rise to 1,967.03 on the day, but still posted a 0.54% weekly loss, also snapping a three-week rally.
For the day, tech investor SoftBank Group was the biggest drag on the Nikkei, shaving off 50 index points with its 3.9% slide.
But automakers outperformed as the yen stabilised around 140 per dollar, after reaching its strongest level since August earlier in the week at 137.665.
Hong Kong stocks dropped off amid more losses for Chinese property developers. That came despite an early tech rally after China’s video games regulator granted publishing licences to 70 online games, including titles belonging to Tencent, NetEase and other developers.
Tech giants listed in Hong Kong rose 2.7%, with NetEase jumping nearly 6% But that momentum was lost and the Hang Seng Index dropped 0.3%, or 53.12 points, to 17,992.54, reversing a gain of as much as 1.8%.
China to Speed Up Covid Vaccinations
China stocks were flat, tracking the cautious mood in regional markets amid concerns of aggressive US tightening and domestic Covid-19 outbreaks.
China plans to speed up Covid-19 vaccinations, the head of China’s Centre for Disease Control and Prevention said on Thursday, as authorities also highlighted the need to build more designated Covid hospitals and increase the number of beds in intensive care units.
The Shanghai Composite Index dipped 0.6%, or 18.19 points, to 3,097.24, while the Shenzhen Composite Index on China’s second exchange dropped 0.5%, or 9.89 points, to 2,029.32.
Elsewhere across the region, Indian stocks dipped with Mumbai’s signature Nifty 50 index down 0.2%, or 36.25 points, to close at 18,307.65.
Bond Market Recession Warnings
Globally, both the dollar and bond yields were shoved higher overnight after St Louis Fed President James Bullard said interest rates might need to hit a range from 5-5.25% to be “sufficiently restrictive” to curb inflation.
That was a blow to investors who had been wagering rates would peak at 5% and saw Fed fund futures sell off as markets priced in more chance that rates would now top out at 5-5.25%, rather than 4.75-5.0%.
The bond market’s warnings of recession were not exactly what Wall Street wanted to hear and they left S&P 500 futures flat, while Nasdaq futures inched up 0.1%. EUROSTOXX 50 futures added 0.7% and FTSE futures 0.3%.
In commodity markets, the bounce in the dollar and yields left gold at $1,762 an ounce and off a top of $1,786 struck early in the week.
Oil futures regained some ground but still nursed steep losses for the week on worries about Chinese demand and ever higher US interest rates.
Brent added 79 cents to $90.57, to be down 5.5% on the week, while US crude rose 92 cents to $82.56 per barrel.
Key figures
Tokyo – Nikkei 225 < DOWN 0.11% at 27,899.77 (close)
Hong Kong – Hang Seng Index < DOWN 0.29% at 17,992.54 (close)
Shanghai – Composite < DOWN 0.58% at 3,097.24 (close)
London – FTSE 100 > UP 0.62% at 7,391.99 (0935 GMT)
New York – Dow < DOWN 0.02% at 33,546.32 (Thursday close)
- Reuters with additional editing by Sean O’Meara
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