Asia’s major stock indexes were under pressure on Thursday as more evidence emerged of a brewing US recession.
Data overnight showed US private employers hired far fewer workers than expected in March, adding to signs of a loosening labour market from earlier in the week. The country’s services sector also slowed more than expected, while earlier figures showed a stalling at factories as well.
Overnight, the dollar held near two-month lows after the weak data supported the view that the Federal Reserve may not need to raise rates much further, propping the yen up.
Also on AF: US Speaker Meets Taiwan’s Tsai, Keen to Boost Arms Support
That saw Japan’s Nikkei share average end at a two-week low, led by a sell-off of exporters on the back of the yen’s overnight strength, while heavyweight technology stocks tracked the Nasdaq’s weakness.
The Nikkei index fell 1.22% to close at 27,472.63, its lowest since March 24. The broader Topix lost 1.14% to 1,961.28.
China and Hong Kong stocks were flat as simmering Sino-US tensions offset fresh evidence of economic recovery and a sustained rally in artificial intelligence (AI) and semiconductor shares.
Superpower frictions rose as US House Speaker Kevin McCarthy hosted Taiwanese President Tsai Ing-wen in California on Wednesday, and stressed the need to accelerate arms deliveries to Taiwan in the face of rising threats from China.
Meanwhile, China’s services activity in March revved up at the quickest pace in two-and-a-half years on robust new orders and job creation and a consumption-led post-Covid recovery, a private-sector survey showed on Thursday.
The Shanghai Composite Index edged back 0.01%, or 0.34 points, to 3,312.22, while the Shenzhen Composite Index on China’s second exchange slipped 0.04%, or 0.78 points, to 2,138.58.
Hong Kong’s Hang Seng Index edged up 0.01%, or 2.42 points, to 20,277.01.
Elsewhere across the region, the mood was also broadly downbeat, with business winding down ahead of the long Easter weekend. Sydney, Seoul, Singapore, Taipei, Jakarta and Manila were down. Wellington was flat and Mumbai edged up slightly.
MSCI’s broadest index of Asia-Pacific shares was down 0.9%, accelerating declines as the trading day unfolded. The index had risen more than 5% since mid-March to close at a one-and-a-half month high on Tuesday.
US Dollar Slips Against Yen
The S&P 500 dipped and the Nasdaq ended sharply lower overnight after a growing wave of weak economic data deepened worries that the Federal Reserve’s rapid interest rate hikes might tip the US economy into a recession.
US Nasdaq E-mini futures pointed to a 0.44% lower restart, after the tech stock benchmark slumped 1% overnight. E-mini futures for the broader S&P 500 indicated a 0.26% decline at the reopen, extending Wednesday’s 0.25% slide.
As signs have built this week for a sharp US slowdown, traders have been pricing for a more dovish Federal Reserve. Money markets now see the odds of a further quarter point hike at the May meeting versus a pause as a coin toss. And 71 basis points of easing are priced by year-end.
“Until last week, I think some stocks, including tech, were more driven by expectations for Fed rate cuts to come earlier [but] now global recession fears are the overwhelming factor,” said Naka Matsuzawa, chief Japan market strategist at Nomura Securities in Tokyo.
“I don’t think anyone at the Fed has even hinted at starting rate cuts this year, so in that sense the market is kind of challenging the Fed.”
Treasury yields have fallen, with the 10-year note yielding around 3.29% in Tokyo, sticking close to the nearly seven-month low of 3.266% reached overnight.
That helped the yen, which is highly sensitive to US yields, to gain against the fellow safe-haven greenback.
The dollar slipped 0.08% to 131.22 yen, but was higher against most other major currencies. The dollar index rose 0.14% to 102.01, continuing its bounce from a two-month low.
Crude oil was also under pressure, with West Texas Intermediate losing 73 cents to $79.88 a barrel and Brent off 74 cents at $84.25.
Key figures
Tokyo – Nikkei 225 < DOWN 1.22% at 27,472.63 (close)
Hong Kong – Hang Seng Index > UP 0.01% at 20,277.01 (close)
Shanghai – Composite < DOWN 0.01% at 3,312.22 (close)
London – FTSE 100 > UP 0.46% at 7,698.46 (0934 GMT)
New York – Dow > UP 0.24% at 33,482.72 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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