Asia’s leading stock indexes retreated on Thursday, pushed back by fading hopes of significant stimulus out of Beijing, a muscular yen and continuing uncertainty over when the US Fed might roll back interest rates.
Japan’s Nikkei share average slipped from a record high to end sharply lower amid a sell-off of chip-related stocks as the yen gained amid growing expectations of a Bank of Japan policy tweak.
The Nikkei ended 1.23% lower – its sharpest daily drop since January 26 – at 39,598.71, after hitting a record high of 40,472.11 tracking overnight Wall Street gains. The broader Topix also reversed course to fall 0.44% to 2,718,54.
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Momentum is building for the BOJ to consider ending negative interest rates as soon as this month, with upcoming annual wage negotiations likely to yield bumper pay hikes for the second year in a row.
BOJ board member Junko Nakagawa said the economy was making steady progress towards achieving the central bank’s 2% inflation target.
Her comments followed Japan’s Jiji Press’ report on Wednesday that some BOJ board members were likely to say that lifting negative interest rates is reasonable at a policy meeting this month.
The speculation sent the yen to scale a one-month high against the dollar.
China stocks fell as better-than-expected trade data dented expectations of strong stimulus, even though the top securities regulator vowed to protect small investors and address deep-rooted issues in the market.
Also hurting sentiment, China’s Foreign Minister Wang Yi said that the US continues to hold the wrong perception of China and has yet to fulfil its promises despite some progress since presidents of both countries met last November.
China’s blue-chip CSI300 Index slipped 0.60% and the Shanghai Composite Index lost 0.41%, or 12.53 points, to end at 3,027.40. The Shenzhen Composite Index on China’s second exchange retreated 1.20%, or 20.61 points, to 1,701.44.
Hong Kong-listed tech giants lost 0.9%, but JD.com jumped 6% after the Chinese online retailer reported fourth-quarter revenue above estimates.
Hong Kong’s benchmark Hang Seng Index dropped 1.27%, or 208.31 points, to close at 16,229.78, and the Hang Seng China Enterprises Index edged down 1.04%.
Elsewhere across the region, in earlier trade, Sydney, Seoul, Mumbai, Taipei, Jakarta and Wellington all rose. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5%, helped by a 1.4% jump in Taiwan’s share market.
Asia Treasuries Drop
Overnight, Wall Street closed higher after Federal Reserve Chair Jerome Powell stuck to the script by saying the Fed still expects to cut rates later this year, even though continued progress on inflation “is not assured”.
That kept bets of a rate cut in June alive at an 84% probability. Longer-term bond yields slipped, the dollar fell, gold prices hit a record high and oil jumped.
Data showed US private payrolls increased slightly less than expected in February, although the report does not have a strong correlation with the official non-farm payrolls report due on Friday.
For now, investors are looking ahead to the policy action in Europe. The European Central Bank is set to keep interest rates steady at a record 4.0%, but any messaging from policymakers that support a rate cut in June would be a relief to markets.
Futures are almost fully priced in for a first rate cut from the ECB in June, with a total easing of 88 basis points expected for all of this year.
In the currency markets, the broad weakness in the US dollar has helped the euro break key resistance to a six-week top of $1.0899, but a major chart level of $1.0916 weighed.
Treasuries were a little lower in Asia. The benchmark 10-year US yield rose almost 2 basis points to 4.1195%, having slipped 3 basis points overnight to 4.0790%, the lowest in a month.
Commodity prices rallied on a softer dollar. Gold prices rose 0.4% on Thursday to $2,156.49, another record high.
Oil prices were mostly flat, having jumped 1%. Brent held at $82.97 a barrel, while US crude was little changed at $79.11 per barrel.
Bitcoin hovered near record highs at $66,361.
Key figures
Tokyo – Nikkei 225 < DOWN 1.23% at 39,598.71 (close)
Hong Kong – Hang Seng Index < DOWN 1.27% at 16,229.78 (close)
Shanghai – Composite < DOWN 0.41% at 3,027.40 (close)
London – FTSE 100 < DOWN 0.41% at 7,648.16 (0933 GMT)
New York – Dow > UP 0.20% at 38,661.05 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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