Asian shares were in retreat on Wednesday with investors on edge ahead of key US inflation data that could spark another round of central bank tightening.
Across the region traders were in cautious mood with mainland China and Hong Kong stocks also weighed down by poor economic data from the world’s No2 economy and the globe’s No1 manufacturing hub.
On the other side of the East China Sea, Japan’s Nikkei share average dropped from a 16-month peak, as nervous investors cashed in ahead of that crucial inflation data release.
Also on AF: China Car Sales Growth Slows as Price War Boost Wanes
At the same time, domestic earnings continued to produce outsized winners and losers, with department store operator Marui Group surging as much as 21%, while Mitsubishi Motors finished down 9.83% after forecasting a drop in profit.
The Nikkei ended down 0.41% at 29,122.18. On Tuesday, it had risen 1% to close at its highest level since January 2022. The broader Topix fell 0.55% to 2,085.91. It closed at its highest since September 2021 on Tuesday.
Bank of Japan Governor Kazuo Ueda’s comment to lawmakers that it was too early to discuss a disposal of the central bank’s ETF holdings buoyed stocks briefly in the early afternoon, before sellers came back in.
The reporting season reaches a crescendo this week. Close to 300 companies report earnings on Wednesday, climbing to almost 500 on Thursday, and reaching a peak at more than 1,000 companies on Friday.
Toyota Motor rose as much as 2.5% after posting favourable financial results mid-afternoon but gains faded to just 0.78% by the close.
Chinese stocks extended their declines after a disappointing April trade data, and as many traders kept their powder dry before the latest US inflation report.
China’s imports contracted sharply in April, while exports rose at a slower pace, pointing to a still-sluggish recovery in domestic goods demand and sliding external demand, analysts say.
Beijing’s Due Diligence Crackdown
And an apparent crackdown on due diligence firms is roiling the sector and unnerving investors. Reuters reported CICC Capital, a unit of leading Chinese investment bank China International Capital Corp, had stopped using consultancy Capvision.
The Shanghai Composite Index slipped 1.15%, or 38.52 points, to 3,319.15, while the Shenzhen Composite Index on China’s second exchange edged up 0.31%, or 6.22 points, to 2,029.27.
The Hang Seng Index dropped 0.53%, or 105.38 points, to 19,762.20 and the Hang Seng China Enterprises Index declined 0.77%.
Elsewhere across the region, in earlier trade, Sydney, Seoul and Taipei all dropped, though Mumbai, Bangkok, Wellington, Manila and Jakarta squeezed out gains. Singapore was flat.
MSCI’s broadest index of Asia-Pacific shares outside Japan had fallen on Tuesday and inched down a further 0.4% on Wednesday.
US Debt Ceiling Deadlock
April US consumer price data is due at 1230 GMT and economists expect the headline CPI to hold steady at an annual 5% and core CPI to moderate very slightly to 5.5%, though anything stickier could confound bets interest rates will fall.
Interest rate futures imply about a 60% chance the Federal Reserve cuts rates in September, according to the CME FedWatch tool.
Treasuries were broadly steady, with brinkmanship over the approaching US debt ceiling fuelling demand for safe assets, including bonds, on one hand, while also driving investors out of T-bills maturing in early June.
President Joe Biden and top lawmakers failed to break a deadlock over raising the $31.4 trillion US debt limit, but vowed to meet again before June, when the Treasury projects it will start struggling to meet its obligations.
Benchmark 10-year yields held at 3.517% in Asia. Two-year yields were at 4.049%.
Brent crude futures hovered at $76.90 a barrel. Gold is starting to settle in above $2,000 an ounce, while bitcoin steadied at $27,732.
Key figures
Tokyo – Nikkei 225 < DOWN 0.41% at 29,122.18 (close)
Hong Kong – Hang Seng Index < DOWN 0.53% at 19,762.20 (close)
Shanghai – Composite < DOWN 1.15% at 3,319.15 (close)
London – FTSE 100 < DOWN 0.18% at 7,750.25 (0934 GMT)
New York – Dow < DOWN 0.17% at 33,561.81 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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CICC Capital Dumps Capvision Amid China Data Crackdown
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