FX168 Financial News (Asia Pacific) News The Asian stock market followed Wall Street's decline on Friday (May 24). Yesterday's US economic activity data showed that the Federal Reserve may keep interest rates unchanged for most of this year.
The Morgan Stanley Capital International Asia Pacific Index fell for the fourth day in a row and will fall for the first time in five weeks. Stock markets from Hong Kong to mainland China, Japan, and Australia all fell. U.S. futures prices rose slightly after the S&P 500 recorded its biggest drop this month on Thursday. #亚市直击 #
Currently, swaps fully reflect the first full 25 basis point price cut by the Federal Reserve in December, compared to November the day before.
The US Composite Purchasing Managers' Index (PMI) shows that business activity is accelerating, and employment indicators in manufacturing and services have also improved. According to the data, US business activity is accelerating at its fastest pace in two years, which mainly reflects strong growth in service providers and a recovery in inflation.
The initial value of the US S&P global manufacturing PMI recorded 50.9 in May, above expectations and the previous value of 50, a new high in 2 months; the initial value of the US S&P global services PMI recorded 54.8 in May, higher than the forecast and previous value of 51.3, a new high in 12 months; and the initial value of the US S&P global composite PMI recorded 54.4 in May, a new high in 25 months.
Against the backdrop of a stronger US dollar, emerging Asian currencies, including the Korean won, Malaysian ringgit, and Thai baht, have declined one after another. The rise of the US dollar against other G10 currencies continued until the fifth day, the longest continuous increase since April.
“The market seems to be in a 'good news (economic) is bad news' model because they are worried that the Federal Reserve's 'high interest rates will last longer',” said Vishnu Varathan, head of Asian economics and strategy at Mizuho Bank. “Rising US Treasury yields and the pressure of a stronger dollar seem to be weighing on emerging Asian stocks and foreign exchange.”
This week, the rebound in global stock markets faltered as investors became less certain about the path of US interest rate cuts, and Fed members were looking for more evidence of easing inflation. The suspension of gains in the Chinese stock market this week and the strengthening of the US dollar also dampened market sentiment.
Investors will also pay attention to the shift in the US to a shorter settlement cycle. The US securities regulator warned that this practice could initially cause some transactions to fail.
According to Reuters, in order to reduce the risk of unsettled transactions after the fluctuation period, starting May 28, the US stock trading settlement cycle will change from T+2 to T+1. Although shortening the settlement time can reduce the risk of buyers and sellers defaulting before the transaction is completed, shortening the cycle may bring operational challenges, such as potential chaos in foreign exchange transactions. Foreign investors must buy US dollars to fund US securities transactions. In addition, there may be other consequences. Fund managers said that global index funds, such as ETFs with large portfolios of assets and mismatched settlements, may also face collapse.
Atlanta Federal Reserve Chairman Raphael Bostic (Raphael Bostic) on Thursday reiterated this week's agreement that the Federal Reserve needs to be patient in its next steps as prices are still under considerable upward pressure. The minutes of the US Federal Reserve's May meeting released this week show that policymakers are unanimous in their desire to keep interest rates high for a longer period of time, and “many” question whether the restrictive nature of the policy is enough to reduce inflation to the target level.
Meanwhile, after artificial intelligence darling Nvidia announced another round of impressive earnings, the chipmaker's stock price rose more than 9% due to promising prospects, breaking the historic mark of $1,000. The trading department of J.P. Morgan Chase said that as the economy steadily strengthens, the S&P 500 may still have room to rise further.
US Treasury bonds rose slightly, after falling due to bets that US interest rates would remain high for a longer period of time. During the Asian trading session on Friday, an index tracking the trend of the US dollar did not change much. After rising US Treasury yields, the index rose for the fourth day in a row.
In Japan, inflation has slowed for the second month in a row, and investors continue to weigh whether the Bank of Japan can raise interest rates further this year. According to data collected by Bloomberg, Japan's 10-year treasury yield surpassed 1% this week, and the market almost completely absorbed the expectations of a 10 basis point rate hike at the July meeting. The exchange rate of the yen against the US dollar is around 157 yen.
However, the cooling in prices will not “stop the financial market from speculating on the Bank of Japan's further tightening policy.” Kristina Clifton, a senior economist at Commonwealth Bank of Australia in Sydney, said, “At this stage, we expect the Bank of Japan to raise interest rates again until around October,” she added.
In the corporate world, according to people familiar with the matter, Alibaba Group raised 4.5 billion US dollars by issuing convertible bonds, which is one of the largest such offerings in recent years. In Japan, Kobayashi Pharmaceutical's stock price soared. Earlier, Oasis Management Chief Information Officer Seth Fischer said that if the Japanese pharmaceutical company cooperated with a rights protection fund, the company's stock price could rise 70%.
Boeing fell 7.6% on Thursday, its biggest drop in four months, after the company said it would continue to burn money this quarter and throughout the year.
On the commodity side, oil prices have stabilized near their lowest level in more than 3 months, as the market showed signs of weakness before the summer driving season in the US.
On the other hand, gold has now recovered its early trading losses after the release of US economic data on Thursday triggered a sell-off. Over the past three trading days, the price of gold has plummeted by more than $100.