Asia markets were in choppy waters on Friday as investors awaited crucial US inflation data, that will set the course for the Federal Reserve’s interest rate outlook.
Markets across the region have been on the back foot since Wednesday after stronger than expected consumer confidence data pushed US government bond yields to a near four-week peak.
While those yields cooled off overnight, driving Asian indexes higher in early trade, jitters about US inflation data — expected later today — led most benchmarks to give up their gains and end in red.
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In Hong Kong, the Hang Seng index inched up more than 1% in early hours of trade, backed by a rally in technology stocks. The Hang Seng Tech Index, at one point, climbed 1.1% before quickly giving all its gains to close 1.65% lower.
The Hang Seng index closed down 150.58 points or 0.83% at 18,079.61. For the week, the benchmark was down nearly 3%.
The Hang Seng China Enterprises index also fell 1.09% to 6,392.58.
A major dent to sentiment, came from a Nikkei report that Tencent Holdings has been asked by China’s regulators to lower the mobile payment market share of its ubiquitous WeChat app. The directive raised investor concerns of renewed regulatory crackdown on China’s tech sector.
Tencent shares closed down by 2.2% after spiking up in early trade on the back of the launch of its artificial intelligence (AI) chatbot app Yuanbao, which it says is built on its own large language model (LLM) “Hunyuan”.
Also weighing on investors was an unexpected fall in China’s manufacturing activity in May, according to data from an official factory survey on Friday. China’s official purchasing managers’ index (PMI) fell to 49.5 in May from 50.4 in April, below the 50-mark separating growth from contraction and missing a median forecast of 50.4 in a Reuters poll.
The soft outcome kept alive calls for fresh stimulus as a protracted property crisis continues to weigh on businesses, consumers and investors.
In China, the Shanghai Composite index closed down 0.16% at 3,086.81. The blue-chip CSI300 index was also down 0.4%, with its financial sector sub-index lower by 0.01%, the consumer staples sector down 0.19%, the real estate index down 0.26% and the healthcare sub-index down 0.58%.
Elsewhere in Asia, Taipei, Bangkok and Jakarta closed down, while Singapore, Manila and Seoul inched up. Indian shares pared early gains to trade slightly higher, with caution setting in ahead of the outcome of the national elections next week.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.5%. The index was set for a gain of about 2.7% in May, rising for the fourth straight month.
Nikkei on high
Unlike its major Asia peers, Japan’s Nikkei ended on strong-footing with gains of 1.1%.
The index rebounded from a one-month closing low in the prior session, as US bond yields fell further after a batch of data suggested the Federal Reserve has scope to cut rates this year.
The Nikkei ended at 38,487.9 after a three-day slide. It was down 0.4% for the week but up 0.2% for the month. The broader Topix also rose 1.7% to 2,772.39. It gained 1.09% for the week and 1.07% for the month.
The market reacted too much in the previous session to the jump in Treasury yields, which subsequently lifted Japanese yields, Kentaro Hayashi, a senior strategist at Daiwa Securities, said.
US Treasury yields slid overnight after data showed the world’s largest economy grew more slowly in the first quarter than previously estimated as consumer spending was revised lower. Japan’s 10-year bond yield rose to 1.07% but was off from a near 13-year peak of 1.1% scaled on Thursday.
All of the Tokyo Stock Exchange’s 33 industry sub-indexes rose, with the brokerage sector jumping 4.25% to become the top performer. Uniqlo-brand owner Fast Retailing gained 1.59% to provide the biggest boost to the Nikkei. Technology investor SoftBank Group rose 3.24%.
Tokyo Electron fell 2.52% to become the biggest drag and percentage loser on the Nikkei. Robot maker Fanuc fell 0.97%.
Inflation data, yen intervention in sight
Investors are now awaiting the US Personal Consumption Expenditures (PCE) price index data, the Fed’s preferred measure of inflation, due later in the day for further direction.
US stock index futures were weaker, though the opening tone will be determined by the inflation data.
“The big driver in the market at the moment is the same old story of when is the Fed going to pivot and start cutting rates,” Mark Ellis, CEO of Nutshell Asset Management, said.
“Although stock markets have performed strongly in May, just in the last week it seems very stressed. I’m expecting that to subside today, and seasonally the first week of June is pretty good for markets,” Ellis added.
Traders are also looking over their shoulders for any hints of intervention from the Tokyo authorities as the Japanese yen flirts with levels that led to suspected bouts of intervention late in April and early this month.
The yen was last at 157.220 per dollar, having touched four-week lows of 157.715 on Wednesday. The currency weakened to its lowest in 34 years at 160.245 on April 29, sparking at least two suspected rounds of interventions.
Data on Friday showed core consumer prices in Japan’s capital rose 1.9% in May on rising electricity bills but price growth excluding the effect of fuel eased, heightening uncertainty on the timing of the central bank’s next interest rate hike.
The dollar index, which measures the US currency against six rivals, was trading at 104.84, on course for 1.4% decline in May, snapping a four-month winning streak.
Key figures:
Tokyo – Nikkei 225 > UP 1.14% at 38,487.90 (close)
Hong Kong – Hang Seng Index < DOWN 0.83% at 18,079.61 (close)
Shanghai – Composite < DOWN 0.16% at 3,086.81 (close)
London – FTSE 100 > UP 0.62% at 8,281.86 (1300 GMT)
New York – Dow < DOWN 0.86% at 38,111.48 (Thursday close)
- Reuters, with additional inputs and editing by Vishakha Saxena
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