Asia’s main share indexes slipped on Thursday with risk-taking in short supply as the threat of more interest rate hikes looms large across trading floors.
Wednesday’s rally proved to be short-lived as a pullback in Chinese stocks and higher US yields amid fears that global central banks will keep raising rates to combat sticky inflation continued to dampen the mood.
Japan’s Nikkei share average ended with a small loss, weighed down by a disappointing Tesla investor day and the risk of a more hawkish Federal Reserve.
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The Nikkei share average edged down 0.06%, or 17.66 points, to close at 27,498.87, while the broader Topix dropped 0.16%, or 3.24 points, to 1,994.57.
Tech was among the worst performing sectors, along with rate-sensitive real estate. Chipmaking equipment giant Tokyo Electron was the Nikkei’s biggest drag, with a 1.62% slide.
Tesla shares slumped more than 5% in extended trading, dragging down US stock index futures, after a highly anticipated plan for an affordable EV failed to materialise.
Investors were also spooked by a jump in US Treasury yields to multi-month highs above 4% in Tokyo trading, as Fed officials sparred over whether high rates for longer would be enough to tame stubborn inflation or more aggressive tightening was needed.
Hong Kong stocks slipped after posting their biggest daily gain in nearly three months in the previous session, with Sino-U.S. tensions weighing on investor sentiment, while China shares dropped in the afternoon session ahead of a key parliamentary meeting.
The United States is reportedly seeking out allies about the possibility of imposing new sanctions on China if Beijing provides military support to Russia for its war in Ukraine, according to sources.
Tech Giants Drag on Hong Kong
Meanwhile, investors in China were waiting for more stimulus clues from the annual meeting of the National Party Congress, which kicks off this weekend and will set economic targets and elect a new leadership team
China’s blue-chip CSI300 Index closed down 0.2%, and the Shanghai Composite Index lost 0.05%, or 1.69 points, to end at 3,310.65.
The Hang Seng Index fell 0.92%, or 190.25 points, to 20,429.46, while the China Enterprises Index slid 0.8%. The Shenzhen Composite Index on China’s second exchange slipped 0.52%, or 11.18 points, to 2,152.64.
Tech giants listed in Hong Kong dropped 1.4%, with Alibaba down 4.7% and JD shedding 2.3%. Chinese EV maker Nio tumbled 13.2% after it reported fourth-quarter earnings below market expectations.
In early Asian trade, Singapore, Mumbai, Wellington and Taipei were also in the red. However, Sydney, Seoul, Manila and Jakarta edged higher.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3%, reversing some of the 2.1% gain posted in the previous session – the index’s best day in two months.
US Dollar Advances
Globally, US futures erased earlier gains, with the S&P 500 stock futures falling 0.5% and Nasdaq futures down 0.7%.
Overnight, both bonds and shares took a battering, as inflation indicators from Germany and the United States reinforced expectations that interest rates would go higher and stay there for longer.
In the United States, manufacturing activity contracted for a fourth straight month in February, but a gauge of prices for raw materials increased last month, stoking concerns that inflation would remain stubborn.
On Thursday, the benchmark 10-year Treasury yields hit a fresh four-month high of 4.0160%, after hitting 4% overnight. The two-year yields also advanced to 4.9080%, a fresh 15-year high.
Investors still mostly foresee the Fed raising rates by 25 basis points at its next meeting later this month but expectations of a larger 50 basis points hike have increased.
In the currency markets, the US dollar index, measuring the greenback’s value against a basket of major peers, gained 0.2% to 104.6.
In the crypto world, shares in Silvergate Capital plunged by as much as 28% after the cryptocurrency-focused bank said it was delaying its annual report and was evaluating its ability to operate as a going concern.
Oil prices were largely steady on Thursday, having risen by 1% the previous day due to optimism over China’s recovery. US crude held at $77.67 a barrel. Brent crude was largely unchanged at $84.34 per barrel.
Key figures
Tokyo – Nikkei 225 < DOWN 0.06% at 27,498.87 (close)
Hong Kong – Hang Seng Index < DOWN 0.92% at 20,429.46 (close)
Shanghai – Composite < DOWN 0.05% at 3,310.65 (close)
London – FTSE 100 < DOWN 0.30% at 7,890.85 (0938 GMT)
New York – Dow > UP 0.02% at 32,661.84 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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