Asian stocks saw a mixed end to the week with China’s ongoing struggles weighing in some corners, while a weak yen lifted the red-hot Nikkei to a new record high.
The yuan fell sharply and Chinese shares skidded, dragging down markets broadly in Asia and dampening an equity rally spurred by a surprise rate cut in Switzerland that had investors wagering on who will ease policy next.
Traders were also on high alert as the yen crept back towards multi-decade lows despite efforts from Japanese government officials to shore it up and the central bank’s historic policy pivot earlier this week.
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China’s yuan weakened sharply to a four-month low and breached the psychologically important 7.2 per dollar level. It was last nearly 0.4% lower at 7.2243.
The fall prompted the country’s major state-owned banks to sell dollars for yuan in an attempt to slow its decline, sources told Reuters.
The yuan has been pressured by growing market expectations that Beijing needs to roll out more stimulus to stabilise the world’s second-largest economy, and by the weaker yen. The state bank buying did little to soothe investors’ nerves.
China’s blue-chip CSI300 index was down 1.01%, with the financial sector sub-index easing 1.62% and the real estate index down 2.22%.
The Shanghai Composite Index lost 0.95%, or 29.08 points, to end at 3,048.03, while the Shenzhen Composite Index on China’s second exchange fell 1.22%, or 22.01 points, to 1,782.30.
In Hong Kong, the sub-index of the Hang Seng index tracking tech shares dipped 3.55%, while the main index dropped 2.16%, or 363.63 points, to 16,499.47.
Meanwhile, Japan’s Nikkei share average closed at an all-time high, underpinned by record gains on Wall Street overnight and strength in automakers’ stocks on a weaker yen.
The Nikkei rose 0.18% to end at 40,888.43, after hitting 41,087.75 earlier in the session to break an all-time intraday high. The index, which crossed the 41,000 level for the first time, rose 5.68% for the week and has posted a 22% gain so far this year. The broader Topix rose 0.61% to 2,813.22.
BOJ Governor Kazuo Ueda on Thursday vowed to keep supporting the economy with ultra-loose monetary policy, in fresh comments after the central bank ended eight years of negative interest rates and other remnants of its unorthodox policy on Tuesday.
Swiss Rate Cut
Elsewhere across the region, in earlier trade, Sydney, Singapore, Seoul, Bangkok, Manila and Jakarta were also down. However, Taipei, Mumbai and Wellington rose.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.85%, weighed down by the slump in China, but looked set to end the week with a marginal gain.
The index remains nearly 2% higher for the month, riding a rally in its global counterparts on the prospect that worldwide interest rates were likely to be lower by the year-end.
S&P 500 futures rose 0.08% and Nasdaq futures gained 0.12%, while Eurostoxx 50 futures fell 0.26%.
The Swiss National Bank (SNB) became the first major central bank to dial back tighter monetary policy with a surprise 25 bps rate cut, which left investors ramping up bets on a June cut by the European Central Bank (ECB) and the Bank of England (BoE).
Although the US Federal Reserve’s decision this week to stick to its projection of three rate cuts this year turned out to be more dovish than some had expected and sent the dollar falling, it was quick to recoup losses thanks to yet another run of resilient US economic data.
The greenback knocked the euro lower, with the single currency last down 0.2% to $1.0837.
In commodities, Brent fell 57 cents to $85.21 a barrel, while US crude eased 55 cents to $80.52 per barrel.
Spot gold was down 0.23% at $2,175.60 an ounce, after hitting an all-time high on Thursday.
Key figures
Tokyo – Nikkei 225 > UP 0.18% at 40,888.43 (close)
Hong Kong – Hang Seng Index < DOWN 2.16% at 16,499.47 (close)
Shanghai – Composite < DOWN 0.95% at 3,048.03 (close)
London – FTSE 100 > UP 0.89% at 7,952.354 (0934 GMT)
New York – Dow > UP 0.68% at 39,781.37 (Thursday close)
- Reuters with additional editing by Sean O’Meara
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