Asia’s major share indexes were in retreat on Friday, in what will be their worst week of the year, pushed back by hawkish central banks and the rising threat of ever more global tightening in the face of persistent inflation.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1.3% and was down 4.2% for the week, its worst in nine months. China was closed for a holiday but Hong Kong shares tumbled on their return from a break while Japan’s Nikkei snapped a 10-week winning streak.
Tokyo’s benchmark average surrendered early gains to end lower, as investors booked in profits ahead of an expected sell-off at the end of the month for portfolio rebalancing.
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The Nikkei index fell 1.45% to close at 32,781,54, after rising as much as 0.8% earlier. The index is down 2.7% for the week and posted its first weekly loss in 11 weeks. The broader Topix slipped 1.38% to 2,264.73.
Trading firms lost 3.38% to become the worst-hit sector among the Tokyo Stock Exchange’s 33 industry sub-indexes.
Hong Kong stocks fell and were set for their sharpest weekly decline since March after hawkish comments by US Federal Reserve Chair Jerome Powell dampened market sentiment.
The Hang Seng Index retreated 1.71%, or 328.38 points, to 18,889.97, while the Hang Seng China Enterprises Index declined 1.71%. Tech giants listed in Hong Kong lost 2.6% to lead the decline.
China’s mainland financial markets were closed for the Dragon Boat Festival holiday. Markets will resume trading on Monday.
Elsewhere across the region, in earlier trade, Sydney, Seoul, Mumbai, Singapore, Manila and Wellington were also in the red.
Bank of England Rate Hike Shock
Across the globe, oil fell and the US dollar surged as a string of hawkish central bank surprises made investors nervous about the economic cost of taming inflation.
S&P 500 futures unwound overnight gains and fell 0.5%. European futures fell 0.6%.
“The situation we’ve seen globally in the last couple of weeks is that the Fed is going to be hiking more and it’s going to take longer to cure this sticky inflation problem,” said Damian Rooney, a dealer at Perth stockbroker Argonaut.
He said the Bank of England’s bigger-than-expected 50-basis point rate hike was “the straw that broke the camel’s back”.
With a lack of stimulus for China’s sputtering recovery, recent unexpected hikes in Australia and Canada and the Federal Reserve’s forecast for two more rate hikes, the growth fears are global.
Growth proxies such as oil and the Aussie dollar each dropped about 1%. Brent crude was last at $73.41 a barrel, while the Aussie is looking shaky at $0.6698. Sterling fell 0.3% to $1.2709.
The US dollar index rose 0.3% to 102.65 and is eyeing a weekly gain for the first time in a month.
Japan Inflation Accelerating
The mood leaves markets fragile with British retail sales data and purchasing managers’ index figures due globally later in the trading day, where even positive surprises could auger badly for the interest rate outlook.
Japan’s core inflation hitting its fastest pace in more than four decades, as data showed on Friday, seemed only to underscore the size and scale of central bankers’ problems.
The data offered some reprieve for the yen, which defied the dollar’s strength to hold steady at 143.17 to the greenback, but added to nerves everywhere else according to Wong Kok Hoong, head of equity sales trading at Maybank in Singapore.
With onshore markets closed, China’s offshore yuan slid to a fresh seven-month low of 7.2286 per dollar as markets started doubting promises of economic stimulus even after China cut benchmark interest rates this week.
In bonds, US Treasuries were sold when Fed Chair Jerome Powell reiterated that further rate hikes are likely, and were steady in Asia. Two-year Treasury yields held at 4.79% and 10-year yields at 3.78%.
The prospect of higher rates weighed on gold, which pays no income, and it slid to three-month lows at $1,910 an ounce.
Key figures
Tokyo – Nikkei 225 < DOWN 1.45% at 32,781.54 (close)
Hong Kong – Hang Seng Index < DOWN 1.71% at 18,889.97 (close)
Shanghai – Composite <> CLOSED
London – FTSE 100 < DOWN 0.17% at 7,488.93 (0933 GMT)
New York – Dow < DOWN 0.01% at 33,946.71 (Thursday close)
- Reuters with additional editing by Sean O’Meara
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