Asian shares slipped on Thursday, under pressure from a choppy bond market in the wake of the US’s debt downgrade, while mixed data out of China weighed on investors’ minds too.
US bonds yields hit nine-month peaks and pushed the dollar higher, while traders waited anxiously to see if results from Apple and Amazon justified the tech sector’s sky-high valuations.
That uncertainty fed into Asia’s markets where Japanese shares fell for a second straight day, tracking the overnight drop on Wall Street, as investor sentiment was hurt by rising yields in Japan too.
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The Nikkei index lost 1.68% to close at 32,159.28, after losing 2.3% in its biggest one-day drop in the previous session. The broader Topix lost 1.45% to 2,268.35.
Japan’s 10-year government yield hit a more-than-nine-year high after US 10-year yields rose overnight, prompting the Bank of Japan to conduct emergency bond buying.
The yen extended its declines after the BoJ’s announcement, falling to a four-week low of 143.89 per dollar, which limited the Nikkei’s losses.
Meanwhile, mainland China and Hong Kong stocks had contrasting fortunes after China’s services activity expanded at a faster pace in July, while Hong Kong’s private sector activity contracted for the first time in the year.
China’s services boost was supported by a jump in business in the summer travel season, a private sector business survey showed, partly offsetting the drag from the weak manufacturing sector.
The Shanghai Composite Index rose 0.58%, or 18.77 points, to 3,280.46, while the Shenzhen Composite Index on China’s second exchange edged up 0.27%, or 5.58 points, to 2,061.64.
Hong Kong Property Stocks Slide
In Hong Kong, private sector activity contracted for the first time in July, the survey showed, further pointing to a weak economy, especially for the manufacturing sector.
Tech stocks traded in Hong Kong were up 0.5%, while mainland property developers were down 0.9%. The Hang Seng Index dropped 0.49%, or 96.51 points, to 19,420.87.
Elsewhere across the region, Sydney, Seoul, Mumbai and Wellington were also off. However, there were gains in Singapore, Manila and Jakarta.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2%, after a sharp drop of 2.3% a day earlier. That compared with a 5.4% monthly gain in July.
Europe looked set for a subdued opening, with Eurostoxx 50 futures 0.1% lower and FTSE futures up 0.2%. The Bank of England is expected to raise interest rates later in the day.
Both S&P 500 futures and Nasdaq futures were flat, following a wave of selling on Wall Street overnight as investors took profits on five months of gains a day after rating agency Fitch cut the US government’s credit rating.
The recent jump in yields has curbed risk appetite, with the Nasdaq and S&P 500 overnight posting their biggest declines since February and April, respectively, after a blistering July driven by better-than-expected earnings and hopes of a soft landing for the US economy.
Apple Revenue Drop Forecast
Later in the day, Apple is expected to report the largest third-quarter drop in revenues since 2016 as sales of iPhones slow.
Amazon.com Inc, a bellwether for consumer spending, is expected to report a more than 8% rise in second-quarter revenue, aided by a recovery in the advertising and e-commerce businesses.
The US dollar was buoyant in Asia at a one-month high of 102.75 against its major peers, after the strong private payrolls data added to signs of labour market resilience in the US. The closely-watched US non-farm payrolls report is due on Friday.
Overnight, Brazil’s central bank cut its benchmark interest rates for the first time in three years and by a larger-than-expected 50 basis points, marking the start of an easing cycle in emerging markets now that US rates have likely peaked.
Elsewhere, oil prices were marginally higher as markets weighed bullish US inventory data and a likely extension of OPEC+ output cuts. Brent crude futures were up 0.2% at $83.37 per barrel and US West Texas Intermediate crude futures rose 0.2% to $79.63.
Key figures
Tokyo – Nikkei 225 < DOWN 1.68% at 32,159.28 (close)
Hong Kong – Hang Seng Index < DOWN 0.49% at 19,420.87 (close)
Shanghai – Composite > UP 0.58% at 3,280.46 (close)
London – FTSE 100 < DOWN 1.38% at 7,457.36 (0934 GMT)
New York – Dow < DOWN 0.98% at 35,282.52 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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