Asian shares slipped Friday after another decline on Wall Street, where hopes for an end to interest rate hikes were again dashed by strong jobs data.
The Federal Reserve has raised its federal funds rate by 5 percentage points from virtually zero in the past year, trying to smother the worst inflation in decades by slowing the entire economy. As the growth trajectory of the U.S. economy improves, it becomes increasingly more challenging to envision what would cause the Fed to CUT rates anytime soon, as many market participants have been anticipating. Meanwhile ,Growth in developing Asia is forecast at 4.8% this year and in 2024, up from 4.2% last year. The People's Republic of China's (PRC) recovery and healthy domestic demand in India will be the region’s main growth supports this year and next.
The Nikkei 225 Index fell 1.17% to close at 32,388 while the broader Topix Index dropped 0.97% to 2,255 on Friday, with both benchmarks sliding for the fourth straight session, taking cues from a weak lead on Wall Street overnight. Investors also digested data showing household spending in Japan declined more than expected in May, while real wages contracted for the 14th consecutive month as consumer inflation outpaced wage growth. Technology and financial stocks led the decline, with notable losses from Advantest (-1.6%), SoftBank Group (-1.2%), Tokyo Electron (-1.3%), Mitsubishi UFJ (-1.7%) and Sumitomo Mitsui (-1.3%). In corporate news, Eisai tumbled 4.7% even after receiving a full approval from the US FDA on its Alzheimer’s drug developed jointly with Biogen. The Nikkei and Topix indexes lost 2.4% and 1.5%, respectively, this week.
The Shanghai Composite fell 0.28% to close at 3,197 while the Shenzhen Component dropped 0.73% to 10,889 on Friday, with both benchmarks sliding for the third straight session. Investors also kept an eye on updates about China’s export controls on semiconductor metals and US Treasury Secretary Janet Yellen’s visit to Beijing to meet with top Chinese officials. Technology stocks led the decline, with notable losses from Talk web Information (-4.4%), Inspur Electronic (-4.1%), Huagong Tech (-5.6%), Kunlun Tech (-3.5%) and Dawning Information (-4%). Commodity-linked, manufacturing and consumer-related stocks also slumped. The Shanghai and Shenzhen indexes lost 0.17% and 1.25%, respectively, this week.
The BSE Sensex closed 500 points lower at 65,280 on Friday, retreating from the record-high posted in the prior session amid external macroeconomic headwinds. Tech giants with high exposure to North American and European markets led the losses, with Tech Mahindra and HCL Technologies both dropping 2%, while Infosys shares decreased 1.1%. Still, a strong outlook for domestic growth, low interest rates by the RBI, and strong divestments out of China supported Indian equities to close the week a little above the flatline.
Investors were watching for updates from U.S. Treasury Secretary Janet Yellen’s visit to Beijing, where she was meeting with senior Chinese officials to try to soothe antagonisms over a host of issues and promote global financial stability.
