Asia stocks steady after US tech rout, yen slips as BoJ stands pat
SINGAPORE: Asian stocks steadied on Friday, taking in stride the resumption of the US technology rout overnight, and European shares look set for a positive start following Thursday’s losses.
The Japanese yen remained near a two-week low against the dollar after the Bank of Japan left monetary policy unchanged as expected even as its US counterpart signalled further tightening.
It was trading 0.3 per cent lower at 111.23 yen per dollar after the BoJ left in place its programme to buy Japanese government bonds, and kept its shortterm interest rate target at minus 0.1 per cent and its 10-year government bond yield target at around zero per cent.
As expected, the central bank offered a more upbeat view on private consumption and overseas economies, signalling its confidence that the recovery was gaining momentum.
Japan’s Nikkei advanced 0.7 per cent, narrowing its loss for the week to 0.3 per cent.
“The market was relieved that there was no mention of an exit strategy, at least for now,” said Yoshinori Shigemi, Global Market Strategist at JPMorgan Asset Management.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped about 0.1 per cent, on track to end the week down 0.85 per cent.
Financial spreadbetters expect Britain’s FTSE 100, Germany’s DAX and France’s CAC 40 to all open up about 0.2 per cent.
Overnight, the Nasdaq led losses on Wall Street with a 0.5 per cent drop, dragged lower by shares including Apple and Alphabet that tumbled on bearish analysts’ reports. The S&P 500 technology index also declined 0.5 per cent. The broader S&P 500 index fell 0.2 per cent and the Dow Jones Industrial Average slipped 0.1 per cent.
“It was a brutal day for the tech sector once again as investors are increasingly more worried about the (Federal Reserve) tightening cycle and how that would put a number of firms in trouble,” Naeem Aslam, Chief Market Analyst at ThinkMarkets in London, wrote in a note.
“The tech boom has been on the back of easy money and lower interest rates. Both of them are leaving town.”
South Korea’s KOSPI slipped about 0.1 per cent, surrendering early gains. The biggest company, Samsung Electronics added 0.1 per cent.
The second biggest firm, semiconductor concern SK Hynix , hit a 15-year high before pulling back to trade 0.2 per cent lower.
The technology-heavy Taiwan index widened gains to 0.6 per cent, with the biggest company, Taiwan Semiconductor Manufacturing Co jumping 1.7 per cent and Apple supplier Hon Hai Precision Industry surging 2.5 per cent.
“This is long overdue... There’s a clear discrepancy, where Asia and emerging market tech names are still being discounted compared to their western counterparts,” said Kay Van-Petersen, Global Macro Strategist at Saxo Capital Markets in Singapore.
“Historically that made sense, but politically, things are potentially a lot more stable in Asia than in developed markets as a whole.”
The dollar index, which tracks the greenback against a basket of trade-weighted peers, climbed to a two-week high.
Data overnight showing the number of Americans filing for unemployment fell more than expected last week, and better-than-expected business conditions in June bolstered the case for Federal Reserve tightening this year.
The index rose 0.1 per cent to 97.539, extending Thursday’s 0.5 per cent gain. It’s on track for a 0.3 per cent rise this week. On Wednesday, the Fed raised interest rates as widely expected, and also released some preliminary details of its plan to begin paring its $4 trillion-plus debt holdings.
Sterling added almost 0.1 per cent to $1.2769. On Thursday, it jumped to as high as $1.2795 on signs of a shift in the Bank of England’s stance on keeping interest rates at record lows.
But it fell back to close flat, as monetary policy uncertainty added to existing concerns about Britain’s political outlook after Prime Minister Theresa May failed to win a parliamentary majority in last week’s election.
In commodities, oil was subdued on continued worries over rising US gasoline inventories adding to already elevated global supply.
US crude fell 0.1 per cent to $44.49 a barrel, remaining near Thursday’s six-week low, on track for a 2.9 per cent drop for the week.
Global benchmark Brent crept up 0.1 per cent to $46.97, set to end the week 2.45 per cent lower.
The dollar’s strength kept gold flat at $1,252.92 an ounce, failing to make up Thursday’s 0.6 per cent drop. It is poised to close the week with a 1 per cent loss, its second weekly decline.