Trading in Asian markets were mixed and muted on Friday morning ahead of a key Fed Chair speech – and as the Bank of Japan governor warned global markets are unstable.
Asian shares were mixed in muted trading on Friday morning as the Bank of Japan’s governor warned global markets are unstable – while analysts also await the outcome of a speech by Federal Reserve Chair Jerome Powell that might deliver clues on how quickly and deeply the Fed may cut interest rates.
Japan’s benchmark Nikkei 225 rose 0.5% to 38,408.44. Australia’s S&P/ASX 200 slipped 0.1% to 8,017.10. South Korea’s Kospi edged down 0.1% to 2,704.79. Hong Kong’s Hang Seng slipped 0.4% to 17,569.38, while the Shanghai Composite gained 0.3% to 2,856.73.
Japan’s plans for interest rates closely watched
Bank of Japan governor Kazuo Ueda, in his comments to parliament, also appeared to indicate more increases may be coming, but they would be gradual. The Bank of Japan was closely monitoring the recent gyrations in stock prices and currencies but saw recent wage increases as a positive sign, he said.
Japan’s economy was dragged down for years by deflation, a gradual decline in prices that reflects a stagnant economy. The bank ended negative interest rates in March then raised rates in July.
“We stuck to a very loose monetary policy until March. The point was our commitment to that until it’s confirmed the economy is on track to realise a gradual, stable rise in prices that’s sustainable,” Ueda told lawmakers.
Ueda also told parliament that the recent market volatility was primarily stoked by concerns around the US economy, rather than the BoJ’s rate increase in late July. However, he said that “markets at home and abroad remain unstable, so we will monitor market developments with a very high sense of urgency”.
Data is due next week on GDP, or gross domestic product, indicating the value of a nation’s products and services, from the US, Canada, Germany and India.
Wall Street sees worst day after two-week rally
On Wall Street, the S&P 500 fell 0.9% for its worst day following a two-week rally. The Dow Jones Industrial Average dropped 177 points, or 0.4%, and the Nasdaq composite sank 1.7%.
Weighing on stocks was a mixed picture on the US economy, which has been slowing under the weight of high interest rates meant to get inflation under control.
One report showed slightly more US workers applied for unemployment benefits last week than expected.
A second report suggested US business activity remains deeply split. Growth for services businesses is accelerating, according to preliminary data from S&P Global Market Intelligence. But the country’s manufacturing sector appears to be contracting at a more severe rate.
“Growth has become increasingly dependent on the service sector as manufacturing, which often leads the economic cycle, has fallen into decline,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
The Fed has pulled its main interest rate to the highest level in more than two decades. With inflation slowing, the wide expectation is for the Federal Reserve to cut interest rates at its next meeting in September, which would be the first easing since the COVID-19 pandemic crash of 2020.
That’s why so much attention is on Jackson Hole, Wyoming, where Powell will speak Friday at an economic symposium that’s been home to big Fed policy announcements in the past.
One danger is if expectations for coming cuts have gone overboard among investors. US companies continue to report mostly better-than-expected profits for the springtime.
Shares of Zoom Video Communications, one winner of the pandemic that saw its fortunes weaken afterward climbed 13% after delivering better results and revenue than expected.
Overall, more stocks fell on Wall Street than rose, including Nvidia, which was the heaviest single weight on the S&P 500.
All told, the S&P 500 fell 50.21 points to 5,570.64. The Dow dropped 177.71 to 40,712.78, and the Nasdaq lost 299.63 to 17,619.35.
In the bond market, the yield on the 10-year Treasury rose to 3.86% from 3.80% late Wednesday.
In energy trading, benchmark US crude rose 9 cents to $73.10 a barrel. Brent crude, the international standard, rose 10 cents to $77.32 a barrel.
In currency trading, the U.S. dollar fell to 145.78 Japanese yen from 146.24 yen. The euro cost $1.1131, up from $1.1115.
