Equity markets in Asia fluctuated Thursday following a tech-led sell-off on Wall Street as investors await US monthly inflation data that will help shape the outlook for the Federal Reserve’s next steps.
(Bloomberg) — Equity markets in Asia fluctuated Thursday following a tech-led sell-off on Wall Street as investors await US monthly inflation data that will help shape the outlook for the Federal Reserve’s next steps.
Japanese and Australian shares rose after initial declines, mainland China stocks whipsawed while Hong Kong and South Korean equities fell.
US equity futures advanced, retracing declines on underlying benchmarks on Wednesday. The S&P 500 fell 0.7%, while the Nasdaq 100 dropped 1.1%, weighed down by a 4.7% drop for Nvidia Corp., as investors rethink the artificial-intelligence frenzy that has helped propel tech shares higher this year.
Long-dated Treasury yields were steady in Asia after falling in the previous session as investors showed fresh demand for 10-year paper. On Wednesday, a $38-billion auction for 10-year Treasuries was awarded at 3.999%, the third straight new issue to pay a fixed rate of less than 4%. The two-year yield, which is more sensitive to interest rates, rose six basis points. Australian and New Zealand bond yields traded higher.
In China, US restrictions on Chinese investments are expected to be narrower than some had feared, as President Joe Biden imposed limits that would regulate US investments in some Chinese semiconductor, quantum computing and artificial intelligence firms.
Alibaba Group Holding Ltd will deliver corporate results, while investors are also focused on Country Garden Holdings Co. after the Chinese developer missed a dollar bond payment, and the effects of deflation following Wednesday data.
“There is a risk with limited China policy support that this confidence erosion that is impacting businesses and households means you will have a chronic shortage of aggregate demand,” said Johanna Chua, chief economist, Asia Pacific, for Citigroup Global Markets, on Bloomberg Television. “That could exacerbate the deflation narrative.”
US consumer price index data for July is due later Thursday. Economists anticipate a slight increase in the headline figure, in part linked to higher oil prices, while core inflation is expected to fall, extending a downward trend that Bloomberg Economics believes will support a rate pause when the Fed next meets in September.
Even if inflation overshoots expectations, the Fed will likely feel its policy is restrictive enough as manufacturing struggles and the jobs market shows signs of softening, according to Fawad Razaqzada, a market analyst at City Index and Forex.com. That means a “small beat” wouldn’t matter too much, he noted.
“A goldilocks outlook in the US is what stock market investors on Wall Street have been enjoying this year – until the recent weakness,” Razaqzada said. “They will be looking for signs that the health and sentiment of the consumer remains positive, enough not increase the risks of a further Fed rate increase, and yet not too depressing to raise recession alarm bells.”
Elsewhere, the Reserve Bank of India will deliver its latest monetary policy decision, with economists anticipating interest rates to remain unchanged.
Most currencies in a group of G-10 counterparts strengthened against the greenback, led by the New Zealand and Australian dollars. The offshore yuan gained for a second day while the yen slightly weakened.
Investors were also focused on rising energy prices. Oil eased lower after two days of gains greater than 1% that pushed crude to a nine-month high. Attention was also fixed on surging European natural gas prices after a 28% rise Wednesday that was attributed to the possibility worker strikes in Australia could reduce supply. Citigroup Inc. analysts predict this could cause European gas and Asian LNG contracts for January to double.
The price of rice also surged to the highest level in almost 15 years, as dry weather threatens Thailand’s crop.
In US corporate earnings, Walt Disney Co. reported profits that exceeded expectations and said it will raise the prices of its streaming services, including a 27% increase for the advertising-free version of the flagship Disney+. The company’s shares rose in after-hours trading on the news. Illumina Inc. fell after the DNA-sequencing firm cut its profit outlook and Wynn Resorts Ltd.’s earnings per share beat analyst forecasts.
Elsewhere, gold edged higher after falling to its lowest level in a month with the precious metal trading at around $1,917 per ounce.
Key events this week:
- India rate decision, Thursday
- US initial jobless claims, CPI, Thursday
- Atlanta Fed President Raphael Bostic pre-recorded remarks for employment webinar, Thursday
- UK industrial production, GDP, Friday
- US University of Michigan consumer sentiment, PPI, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.4% as of 12:05 p.m. Tokyo time. The S&P 500 fell 0.7%
- Nasdaq 100 futures rose 0.4%. The Nasdaq 100 fell 1.1%
- Japan’s Topix rose 0.6%
- Australia’s S&P/ASX 200 rose 0.1%
- Hong Kong’s Hang Seng fell 0.9%
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures rose 0.6%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0980
- The Japanese yen was little changed at 143.87 per dollar
- The offshore yuan was little changed at 7.2232 per dollar
- The Australian dollar rose 0.1% to $0.6536
- Bitcoin rose 0.3% to $29,566.67
- Ether was little changed at $1,853.3
- The yield on 10-year Treasuries was little changed at 4.02%
- Japan’s 10-year yield advanced two basis points to 0.585%
- Australia’s 10-year yield advanced two basis points to 4.02%
- West Texas Intermediate crude fell 0.2% to $84.25 a barrel
- Spot gold rose 0.2% to $1,917.53 an ounce
This story was produced with the assistance of Bloomberg Automation.
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