Asian shares dropped on Wednesday as uncertainty over policy directions in China and Japan, and hotter-than-expected US inflation, brought down the mood on trading floors.
Overnight data showed US consumer prices increased a solid 0.36% in February against expectations for a 0.3% rise, amid higher costs for fuel and shelter, though on an annual basis core CPI slowed slightly to 3.8%.
Japan’s Nikkei share average fell for a third straight session as investors also reacted to the likelihood of a policy shift at next week’s Bank of Japan (BOJ) meeting.
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Market players were trading with caution ahead of the BOJ’s policy meeting, with many expecting Japan’s central bank to lift short-term interest rates from negative territory either next week or by April.
The Nikkei fell 0.26% to close at 38,695.97, retreating after briefly surpassing the psychologically significant 39,000 level. The broader Topix ended 0.33% lower at 2,648.51.
The yen strengthened in the Asian morning, weighing on exporters that benefit from a weaker currency, as traders awaited the initial results of the closely watched spring wage negotiations, due out on Friday.
China stocks fell, dragged by property developers as Country Garden missed a coupon payment amid some profit-taking after no policy surprise from the annual parliament meeting, while Hong Kong shares tracked global peers higher.
Country Garden Holdings fell 3.3%, as the Chinese property developer said funds for a $13 million coupon payment due Tuesday were not fully in place and it planned to raise funds for the missed onshore coupon payment within 30-day grace period.
China’s blue-chip CSI300 Index slipped 0.70%, while the Shanghai Composite Index fell 0.40%, or 12.10 points, to 3,043.83. The Shenzhen Composite Index on China’s second exchange dipped 0.11%, or 2.01 points, to 1,768.56.
The CSI 300 Real Estate Index declined 2.3%, insurance slumped 3%, and infrastructure lost 2.6%.
Hong Kong’s benchmark Hang Seng lost 0.07%, or 11.39 points, to end at 17,082.11, and the Hang Seng China Enterprises Index was down 0.29%. Mainland developers listed in the city slipped 0.7% but tech giants gained 0.8%.
Elsewhere across the region, in earlier trade, Mumbai and Wellington also dipped. Sydney, Seoul, Singapore, Taipei, Manila, Bangkok and Jakarta rose. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2% to its highest level since early August.
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US Treasury yields rose after the US inflation reading, with two-year yields finishing the New York session 6.5 basis points higher at 4.599% and 10-year yields climbing 5.1 bps to 4.155%. Early trade in Tokyo was steady.
Interest rate futures also fell slightly in response, though pricing for June slipped only marginally to imply about a 68% chance of a cut and US stock indexes, after hesitating, surged to record highs.
In foreign exchange, the move upwards in US yields gave a little support to the dollar but traders mostly took the inflation surprise in their stride. The Aussie dollar was steady at $0.6603 and the euro at $1.0952.
The yen, which has been lifted from lows by growing expectations of a rate rise in Japan was about 0.2% firmer at 147.33 per dollar as news of wage hikes at large companies was rolling in.
In commodities, higher yields yanked gold from near record levels and it was last at $2,157 an ounce. Crude futures have been rangebound for several weeks. Brent was last 0.5% stronger at $82.36 a barrel.
Bitcoin touched a record $72,989 overnight.
Key figures
Tokyo – Nikkei 225 < DOWN 0.26% at 38,695.97 (close)
Hong Kong – Hang Seng Index < DOWN 0.07% at 17,082.11 (close)
Shanghai – Composite < DOWN 0.40% at 3,043.83 (close)
London – FTSE 100 > UP 0.16% at 7,760.13 (0935 GMT)
New York – Dow > UP 0.61% at 39,005.49 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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