Asian shares were largely in retreat on Thursday following a multi-session rally sparked by Beijing’s stimulus ‘bazooka’.
Stocks across the region pulled back from 32-month peaks as Hong Kong took a breather after Wednesday’s 6% gain, while Japan’s Nikkei was the outlier, bouncing back as the risk of further tightening in monetary policy this year faded.
Several Asian markets including South Korea, Taiwan and mainland China were closed for the day, and MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1%, largely driven by a drop in Hong Kong’s Hang Seng index.
That came after its meteoric rise of more than 30% over just three weeks, fuelled by a flurry of Chinese stimulus measures to revive a faltering economy.
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The Hang Seng Index dipped 1.47%, or 330.22 points, to 22,113.51, as investors booked gains across high-flying sectors such as property, financial and tech.
Chinese H-shares listed in Hong Kong – stocks belonging to companies from the Chinese mainland – dropped 3.44%, while the Hang Seng Tech Index slumped 5.2%.
Hong Kong-listed mainland property developers tumbled more than 7%, and financial sector stocks dropped 2%, with Citic Securities falling 11% to lead the decline.
Japan’s Nikkei share average, however, rebounded, buoyed by a softer yen as Prime Minister Shigeru Ishiba’s dovish comments reduced bets of further tightening in monetary policy.
Ishiba said Japan is not in an environment for an additional rate increase, in an apparent effort to shake off his reputation as a monetary hawk, after a meeting with Bank of Japan Governor Kazuo Ueda on Wednesday.
The Nikkei share average was up 1.97%, or 743.30 points, to close at 38,552.06, while the broader Topix was ahead 1.20%, or 31.75 points, to 2,683.71.
Export-related shares gained on the back of a softer yen. Sony Group rose 1.5% and automaker Toyota Motor gained 2.1%. Chip-related shares Tokyo Electron and Advantest climbed 3.3% and 4.1%, respectively, while AI-focused startup investor SoftBank Group rallied nearly 3%.
The yen hovered around 146.95 per dollar. It had scaled a high of 141.65 on Monday, as markets digested Ishiba’s win in the ruling Liberal Democratic Party’s leadership election on Friday.
Wall Street Flat
Elsewhere across the region, in earlier trade, Sydney, Singapore, Wellington, Manila and Jakarta were all in the green but Mumbai slipped.
Overnight, Wall Street was mostly flat, though Treasury yields rose after a strong private payrolls report added to evidence of a healthy US labour market, lessening the risk of a big downside miss for Friday’s non-farm payrolls data.
Bonds this week have been supported by safe-haven flows as geopolitical tensions in the Middle East ratcheted up. Israel said eight of its soldiers were killed in combat in south Lebanon as its forces thrust into its northern neighbour in a campaign against the Hezbollah armed group.
Two-year Treasury yields were little changed at 3.652%, while ten year yields were flat at 3.792%.
Markets imply a 36% chance the Fed will cut by another 50 basis points in November, compared with almost 60% last week, and have 70 basis points of easing priced in by year-end.
Markets ramped up bets that the European Central Bank will cut rates at each of its meetings in October and December after a top policy hawk Isabel Schnabel sounded more sanguine about inflation coming under control.
Oil prices rose on worries the escalating Middle East conflict could threaten oil supplies from the world’s top producing region. Brent futures rose 1.2% to $74.82 a barrel.
Gold hovered near a record high at $2,652.75 an ounce.
Key figures
Tokyo – Nikkei 225 > UP 1.97% at 38,552.06 (close)
Hong Kong – Hang Seng Index < DOWN 1.47% at 22,113.51 (close)
Shanghai – Composite <> CLOSED
London – FTSE 100 < DOWN 0.04% at 8,287.33 (0935 BST)
New York – Dow > UP 0.09% at 42,196.52 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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