Asia report: Markets mixed as investors watch US bond yield curves
Markets in Asia finished in a mixed state on Thursday, after an inversion of the primary yield curve in US Treasury bonds inverted overnight, leading to fears of a potential recession looming stateside.
AUD/USD
$0.6495
17:02 24/04/24
GBP/NZD
NZD2.0973
17:01 24/04/24
Hang Seng
17,201.27
10:21 24/04/24
Nikkei 225
38,460.08
09:44 24/04/24
USD/JPY
¥155.0030
17:02 24/04/24
In Japan, the Nikkei 225 was down 1.21% at 20,405.65, as the yen weakened 0.21% against the dollar to last trade at JPY 106.13.
Of the major components on the benchmark index, automation specialist Fanuc was down 0.63%, fashion firm Fast Retailing lost 1.95%, and technology conglomerate SoftBank Group was 0.24% weaker.
Banks in Japan were among those hit globally after the financial sector took a particular beating on Wall Street overnight, with Mitsubishi UFJ Financial Group down 1.09% and Nomura off 0.6%.
The broader Topix index was 1.04% weaker in Tokyo, closing its trading day at 1,483.85.
On the mainland, the Shanghai Composite managed gains of 0.25% to 2,815.80, and the smaller, technology-heavy Shenzhen Composite was 0.54% higher at 1,517.07.
China’s currency saw its loose peg weaker than analysts expectations once again, with the onshore yuan set at CNY 7.0268 against the dollar by the People’s Bank of China.
The central bank allows onshore renminbi to trade at 2% above or below its daily reference point.
It was the sixth session in a row that the currency was set at a level weaker than the psychologically-important CNY 7 against the greenback - moves which saw the US Treasury Department label the country a ‘currency manipulator’ in recent weeks.
South Korea’s Kospi was 0.65% firmer at 1,938.37, while the Hang Seng Index in Hong Kong rose 0.76% to settle at 25,495.46.
The blue-chip technology stocks were both higher in Seoul, with Samsung Electronics up 1.63%, and chipmaker SK Hynix rising 3.22%.
Investors began the Asian day watching the US bond market, after the yield on the 10-year Treasury note broke below the two-year rate overnight for a brief time.
The phenomenon is widely understood to be an indicator of a potential recession in the United States.
“Now it is important to point out that an inverted yield curve has given false signals in the past on possible US recessions - around the Russia/LTCM crisis in 1998 for example - while other countries have experienced prolonged yield curve inversion in the past without recession - the UK for example through much of the 1990s,” noted analysts at ING late on Wednesday.
Escalating tensions between the US and China were also weighing on the mood, after China said the US had violated past agreements with its 10% tariffs and that Beijing will have to take countermeasures.
“This does not bode well and may encourage Trump to react - there is a chance he could bring forward all the tariffs to 1 September,” said Neil Wilson, chief market analyst at Markets.com.
“Countermeasures suggests China is not interested in the delay to tariffs - and may have sniffed a weakness in the US position and is keen to exploit it.”
Wilson said retaliation by China meant escalation in tensions, and diminished the chances of a positive outcome in the near term.
“Risks are still to the downside. As ever, though, only a tweet away.”
Oil prices were lower as the region went to bed, with Brent crude last down 1.99% at $58.32 per barrel, and West Texas Intermediate 1.47% lower at $54.43.
In Australia, the S&P/ASX 200 slid 2.85% to close its trading session at 6,408.10, after fresh data showed an unchanged rate of unemployment in the country, even as employment numbers rocketed past expectations.
According to the data, a total of 41,100 new jobs were added in the sunburnt country in July - well ahead of the 14,000 expected - but the unemployment rate clung stubbornly to the 5.2% level.
The financials subindex was in the red in Sydney alongside the global downturn in bank stocks, with the country’s ‘big four’ all in the red.
Australia and New Zealand Banking Group was off 2.96%, Commonwealth Bank of Australia was down 2.99%, National Australia Bank lost 3.07%, and Westpac Banking Corporation slid 3.19%.
Across the Tasman Sea, New Zealand’s S&P/NZX 50 was down 1.3% at 10,704.11, led lower by regulated broadband infrastructure operator Chorus, which slid 4%.
Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.49% at AUD 1.4747, and the Kiwi advancing 0.15% to NZD 1.5519.