Asian Markets Distracted By US Jobs Data, Surging Inflation

Asia’s major markets went into reverse on Friday with traders distracted by the release of key US jobs data later in the day, while investors were also assessing the outlook for central bank monetary policy in the face of runaway inflation.

Equities around the world enjoyed a healthy run-up on Thursday after the Federal Reserve finally announced its plan for tapering the vast bond-buying programme that has provided crucial support since it was put in place at the start of the pandemic.

The news removed a lot of uncertainty from market floors and followed moves in other countries to step back from their ultra-easy measures as the world economy recovers.

However, the Bank of England’s decision on Thursday not to lift rates shocked traders, who had taken recent indications from boss Andrew Bailey that it would do so.

Also on AF: Embattled Kaisa Group’s Shares Suspended in Hong Kong

Bond yields, which indicate future pricing for interest rates, sank after the announcement and raised concerns about further uncertainty, particularly as inflation remains doggedly high owing to supply chain snarls, high commodity prices and wage growth. That has fuelled talk of a period of stagflation when prices surge but economic growth stalls.

The BoE decision also hammered the pound, which sank against the dollar, and it struggled to recover on Friday sitting below $1.35, having been at $1.37 beforehand.

Still, Wall Street enjoyed another record day, with tech firms the main beneficiaries as they are more susceptible to higher borrowing costs. The S&P 500 and Nasdaq both chalked up new highs for a fifth straight day, though the Dow dipped. Markets in Paris and Frankfurt were also at new peaks.

However, Asian investors struggled to follow suit. Hong Kong led the selling, with traders keeping a nervous eye on developments in the China Evergrande saga with a Saturday deadline looming on an overdue bond payment.

Another hugely indebted property firm, Kaisa, suspended trading in its shares in the city on Friday as it battles to find cash to meet its own obligations.

The Hang Seng Index fell 1.41%, or 354.68 points, to 24,870.51.The Shanghai Composite Index sank 1.00%, or 35.30 points, to 3,491.57, while the Shenzhen Composite Index on China’s second exchange lost 0.77%, or 18.74 points, to 2,406.42.

Oil Prices Climb

Tokyo, Shanghai, Bangkok, Jakarta and Seoul also fell. The benchmark Nikkei 225 index ended down 0.61% or 182.80 points at 29,611.57 while the broader Topix index slipped 0.69% or 14.14 points to close at 2,041.42.

But there were gains in Sydney, Singapore, Wellington and Taipei. Manila jumped 1.9% as virus measures were eased in the Philippine capital while London, Paris and Frankfurt all fell at the open.

Oil climbed after OPEC and other major producers stuck to their plan to modestly lift output despite surging demand and concerns about supplies.

The move also ignored a call from US President Joe Biden and other big energy consuming nations to open the taps further.

Friday’s gains came after a recent heavy retreat in prices following news that Iran nuclear talks were progressing and could lead to the removal of sanctions barring the sale of Tehran’s crude on world markets.

MARKETS

Tokyo > Nikkei 225: DOWN 0.6% at 25,611.57 (close)

Hong Kong > Hang Seng Index: DOWN 1.4% at 24,870.51 (close)

Shanghai > Composite: DOWN 1.0% at 3,491.57 (close)

New York > Dow: DOWN 0.1% at 36,124.23 (close)