HONG KONG, RAW – Asian shares could be heading for a second successive week of gains, though trading was choppy amid hawkish US monetary policy, shifts in Chinese economic policy, and ongoing ructions in commodity markets due to the war in Ukraine.
MSCI’s broadest index of Asia-Pacific shares outside Japan traded flat, but is up one per cent on the week.
Japan’s Nikkei was also little changed having closed the previous day at a nine-week high.
Hong Kong shares were a drag on the regional benchmark, falling 0.5 per cent, weighed down by tech stocks, as US and Hong Kong dual-listed names took a hit from renewed fears a row over audit records will force them to delist in the United States.
Australian stocks rose 0.4 per cent helped by miners, while Chinese blue chips lost 0.4 per cent.
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“In terms of Asia we have seen asset prices stabilise a little bit this week following last week’s statement from the Chinese vice premier,” Carlos Casanova, senior Asia economist at UBP, said.
This may not be sustainable unless we see additional easing and have better visibility on the regulatory front, but it did seem to have the desired effect in terms of limiting downside risks.
“What we are starting to see is a little more caution from global investors when it comes to the US economy, and what that means for Asia.”
Last week, Chinese vice premier Liu He said Beijing would roll out support for the economy, sending Chinese and Hong Kong stocks higher initially.
Investors were also watching to see whether the Bank of Japan would intervene to buy Japanese government bonds as its yield target came under pressure.
The yield on 10-year JGBs rose to 0.235 per cent on Friday morning, exceeding the level at which the BOJ offered to buy an unlimited amount of JGBs at 0.25 per cent on February 10, part of a policy to maintain interest rates at their current ultra-low levels.
Japanese bond yields are being pulled higher by US Treasury yields, which have risen along with expectations for a more aggressive pace of rate hikes by the US Federal Reserve.
US 10-year notes last yielded 2.3681 per cent just off Tuesday’s 22-month high of 2.417 per cent.
Chicago Fed President Charles Evans was the latest US policymaker to sound more hawkish, saying on Thursday the Fed needs to raise interest rates “in a timely fashion” this year and in 2023 to curb high inflation before it is embedded in US psychology and becomes even harder to get rid of.
The divergence between US and Japanese monetary policy has weighed on the yen.
On Friday, the US dollar climbed a further 0.41 per cent to 121.84 yen, a new multi-year high.
Higher commodity prices driven by the war in Ukraine is also hurting the Japanese currency, as Japan imports the bulk of its energy.
The US dollar’s gains against other currencies have been less dramatic, however, with its index measure against six peers down a little at 98.536.
Overnight, the three main US stock indexes each rallied more than one per cent, as investors snapped up beaten-down shares of chipmakers and big-growth names and supported by a fall in oil prices.
S&P 500 future inched up 0.1 per cent in early Asia trade.
Oil continued to slide a little, as the United States and allies considered releasing more stock from storage to cool markets, Brent crude falling 0.22 per cent to $US118.77 per barrel and US crude down 0.5 per cent to $US111.74 a barrel, but prices were still very high by historic standards.
Spot gold remained elevated at $US1,961.9 an ounce, up 0.22 per cent.