Asian stocks threw away early gains to dive into the red on Thursday as a poor China manufacturing report weighed and the Bank of Japan’s surprise interest rate rise began to hit home.
A revival in tech stocks helped by Meta and Nvidia, and the prospects of imminent policy easing in the United States, had boosted global bonds and commodities in the early part of the day.
But the mood darkened as investors digested the news a private sector survey showed China’s manufacturing activity shrank for the first time in nine months in July, while the yen surged after the BoJ’s move hitting exporters’ fortunes.
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Tokyo stocks tumbled, with the Nikkei index briefly sliding over 3%, as growing concerns over Japanese corporate earnings prospects also distracted traders
The 225-issue Nikkei Stock Average ended down 975.49 points, or 2.49%, from Wednesday at 38,126.33. The broader Topix index finished 90.57 points, or 3.24%, lower at 2,703.69.
Every industry category on the top-tier Prime Market lost ground, led by real estate, transportation equipment and insurance issues.
The yen briefly hit a four-month high at the 148 level against the US dollar, driven by active demand after the BOJ chief signalled on Wednesday the possibility of a further interest rate hike at a time when the US Federal Reserve is seen as on course to cut rates in September.
Stocks suffered heavy selling, with auto and electronics shares pressured by concerns that their overseas profits will be reduced by a stronger yen when repatriated, brokers said.
Real estate issues also lost ground on fears that the BOJ’s rate hike would lead to higher mortgage rates and dampen housing demand.
China stocks fell, following the biggest one-day gain in five months in the previous session, while a weakening yuan also dented investor sentiment.
India Stocks Advance
The Caixin/S&P Global manufacturing PMI fell to 49.8 in July from 51.8 in the previous month, the lowest reading since October last year and missing analysts’ forecasts of 51.5.
The reading, which mostly covers smaller, export-oriented firms, was in line with an official PMI survey on Wednesday that showed manufacturing activity slipped to a five-month low.
China’s blue-chip CSI300 index was down 0.66% with, earlier in the session, its financial sector sub-index higher by 0.03%, the consumer staples sector down 2.2%, the real estate index down 2.25% and the healthcare sub-index down 1.03%.
The Shanghai Composite Index fell 0.22%, or 6.36 points, to 2,932.39, while the Shenzhen Composite Index on China’s second exchange dipped 0.53%, or 8.59 points, to 1,602.19.
Chinese H-shares listed in Hong Kong – stocks belonging to companies from the Chinese mainland – fell 0.37% to 6,084.36, while the Hang Seng Index was down down 0.23%, or 39.64 points, to 17,304.96.
Elsewhere across the region, Indian stocks advanced with Mumbai’s signature Nifty 50 index up 0.09%, or 21.80 points, to 24,972.95.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.7%, after ending July mostly flat. A regional MSCI IT index jumped 2.0% and Taiwan’s shares surged 1.8%.
Bank of England Bets
The Federal Reserve held interest rates steady overnight but opened the door to a cut in September. That had traders wagering that the Bank of England might cut later in the day, with the probability of a move at 60%.
European futures were also set for a higher open, with Eurostoxx 50 futures up 0.2% and FTSE futures rising 0.3%. Nasdaq futures gained 0.9% as shares of Facebook-parent Meta Platforms surged 7% after the bell on strong earnings.
On Wall Street, tech stocks made an extraordinary comeback after the recent sell-off. AI darling Nvidia rallied 13%, adding about $330 billion in stock market value on Wednesday. Tech giants Apple and amazon.com will report their earnings later on Thursday.
Treasuries held onto most of their overnight gains. The yield on 10-year Treasuries rose 3 basis points to 4.06%, having dropped 11 bps overnight to the lowest since March.
The dollar’s slump against a rampant yen dragged down its broader value against a range of currencies. The dollar index stood at 104.04 on Thursday against its major peers, having fallen 0.4% overnight.
In commodity markets, oil prices extended their surge overnight after the killing of a Hamas leader in Iran raised the threat of a wider Middle East conflict.
Brent crude futures rose 0.8% to $81.48 per barrel, while US West Texas Intermediate crude futures increased 0.9% to $78.61 per barrel. They both jumped about 4% in the previous session.
Key figures
Tokyo – Nikkei 225 < DOWN 2.49% at 38,126.33 (close)
Hong Kong – Hang Seng Index < DOWN 0.23% at 17,304.96 (close)
Shanghai – Composite < DOWN 0.22% at 2,932.39 (close)
London – FTSE 100 < DOWN 0.14% at 8,356.56 (0933 BST)
New York – Dow > UP 0.24% at 40,842.79 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
Read more:
Surveys Show Chinese Factories Facing Gloomy Outlook Risks
US Forced To Delay Tariff Hikes on Chinese EVs, Batteries, Tech
China Factory Activity Slips to a Five-Month Low, Survey Shows
Nikkei Rallies on BoJ Rate Twist, Policy Bets Lift Hang Seng
