Asia’s major stock indexes experienced a mixed start to the week with fading hopes of a cut in US interest rates anytime soon taking the edge off China’s post-Lunar Holiday week return.
Japan’s benchmark eased back from Friday’s near-record highs while China’s signature bourse enjoyed just a modest boost following the country’s annual break while Hong Kong suffered a tech-induced slide.
Tokyo’s Nikkei share average saw a minor retreat on Monday, pressured by chip-related shares in the wake of losses for US peers on Friday.
Nintendo also tumbled following media reports that the successor to its switch game console won’t be released until early 2025, instead of later this year.
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The benchmark Nikkei ticked down 0.04% to finish the day at 38,470.38, after pushing as high as 38,865.06 on Friday. That was just 93 points from the all-time high reached on the final trading day of 1989, at the peak of Japan’s bubble economy.
“The Nikkei will break the record, probably in the near future,” said Kenji Abe, a strategist at Daiwa Securities who forecasts the index will reach 43,000 by March of next year. “I don’t know whether it can be this week or next week, but it’s just a matter of time.”
The outsized drag from tech shares on the Nikkei was borne out in the much better performance of the broader Topix index, which gained 0.57%. A Topix index of growth shares slipped 0.14% while a value share index rallied 1.26%.
Trading was also likely thinned by the President’s Day holiday in the US. The Nikkei has climbed a blistering 15% this year already, and technical indicators are flashing warnings of overheating.
China shares gained as investors returning from the week-long Lunar New Year break snapped up tourism and entertainment stocks in the wake of buoyant holiday spending.
Tourism revenues in China during the Lunar New Year holiday surged 47.3% from a year earlier, official data showed on Sunday. On the entertainment front, China’s box office revenue exceeded $1.11 billion during the eight-day break, marking a record high.
Traders were also inspired by last week’s robust performance in Hong Kong stocks and US-listed Chinese companies.
US Prices Readings
Some are betting the government will roll out more measures soon to support China’s struggling economy and the market, though the central bank kept a key policy rate unchanged on Sunday.
China’s blue-chip CSI300 Index rose 1.16%, while the Shanghai Composite Index climbed 1.56%, or 44.64 points, to 2,910.54. The Shenzhen Composite Index on China’s second exchange gained 1.70%, or 26.84 points, to 1,604.17.
But Hong Kong’s Hang Seng Index retreated 1.13%, or 184.35 points, to 16,155.61, after a three-day rising streak, with the tech subindex plunging 2.7%.
Elsewhere across the region, in earlier trade, Seoul was up 1.19% and Singapore gained as well. Sydney, Mumbai, Bangkok and Taipei were also slightly higher but Jakarta dipped and Wellington fell. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, after bouncing 2% last week.
In the United States, high readings on producer and consumer prices have seen markets sharply scale back their pricing for rate cuts.
Futures have sunk to imply just a 28% chance rates will be cut in May, when it was considered a done deal a couple of weeks ago. Markets have taken out two quarter point rate cuts for this year to imply less than 100 basis points of easing.
Nvidia Stock Surge
The surprise on inflation means the minutes of the Fed’s last policy meeting out this week now look dated, but any talk about the timing of potential cuts will be noted.
The market sea change on rates saw two-year Treasury yields spike to a new 2024 high of 4.72% on Friday before steadying at 4.65%. Treasury futures were little changed with the cash market closed.
S&P 500 futures were flat, while Nasdaq futures added 0.24% helped by hopes Nvidia could somehow beat already stratospheric expectations.
The chipmaker’s stock has surged 46% so far this year and accounted for more than a quarter of the S&P 500’s gains. There is reason for optimism given that of the 80% of S&P 500 reporting so far, 75% have beaten forecasts.
Higher bond yields were underpinning the dollar at 149.99 yen, though the threat of intervention has so far capped it at 150.88.
Oil prices were softer in early trade as concerns about demand tussled with the threat of supply disruptions in the Middle East.
Key figures
Tokyo – Nikkei 225 < DOWN 0.04% at 38,470.38 (close)
Hong Kong – Hang Seng Index < DOWN 1.13% at 16,155.61 (close)
Shanghai – Composite > UP 1.56% at 2,910.54 (close)
London – FTSE 100 < DOWN 0,04% at 7,708.67 (0934 GMT)
New York – Dow < DOWN 0.37% at 38,627.99 (Friday close)
- Reuters with additional editing by Sean O’Meara
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