Asian stocks drift lower despite Wall St record
HONG KONG: Asia stocks were mostly lower on Tuesday despite yet another record close on Wall Street, as investors set their sights on upcoming US inflation data for fresh clues on the American economy.
The Dow Jones eked out a ninth straight all-time high on Monday, as strong second-quarter earnings continued to boost US equities, while the tech-heavy Nasdaq also advanced.
But regional bourses paused for breath in light summer holiday trading, after recording healthy gains on Monday on optimism over global growth triggered by a better-than-expected US jobs report for July.
In Tokyo a stronger yen, which weighs on exporters’ profits, helped nose Japanese equities down as the greenback gave up some ground secured Friday’s robust US jobs data.
The Nikkei closed down 0.3 per cent, also dragged down by tech giant SoftBank slipping into negative territory as it announced a dive in April-June net profit. But Hong Kong continued a month-long advance as traders prepared for more earnings from heavyweights including China Mobile.
Analysts said recent rises in equities in the US and Asia had been driven by strong earnings. “The message from corporate CEOs around the world was loud and clear,” said Chris Weston, chief market strategist at IG Markets.
“They are not concerned with Trump, geopolitics or trade restrictions, they see earnings growth as the main game in town, and equity investors are after aligned with this outlook.”
Market watchers are now eyeing whether the US blue-chip index can match the all-time run of gains seen in January 1987, Weston added.
Shanghai stocks were little changed despite official figures showing Chinese trade growth in July came in well below expectations after months of steady momentum.
“Despite the uptick at the end of (the second quarter), trade growth now appears to be on a downward trend,” said Julian Evans-Pritchard, a China economist at Capital Economics.
However, export and import rates were still robust year-on-year — with imports up 11 per cent — and the dramatic shift of the world’s largest trading nation to a consumer economy is an increasingly central pillar of global growth. Sydney and Seoul also ended the day in the red, while European stocks retreated in opening trade after the underwhelming session in the AsiaPacific.
Traders are now turning their focus to US inflation data out on Friday for clues on monetary policy in the world’s top economy.
Federal Reserve speakers overnight said soft US inflation was a problem as they played down the risk of market disruption when the central bank starts shrinking its balance sheet.
The comments reinforce market expectations that officials will keep interest rates on hold next month, putting pressure on the greenback.
The dollar was weakening in forex trade on Tuesday, at around 1.18 to the euro and at about 110.6 yen, but analysts said moves this week could be muted ahead of Friday’s data.
“Given the enormity of inflation metrics in the Fed’s rates outlook, I suspect traders will be reluctant to commit big views prior to the event and even more so given August’s sparse liquidity conditions,” said Oanda analyst Stephen Innes.
On commodities markets, crude started to claw back losses before the end of a meeting of leading oilexporting countries to examine why some producers were failing to fully implement cuts to rein in global supply.
“The market will look for confirmation that the group will continue to abide by their cuts,” said David Lennox, a Sydney-based analyst at Fat Prophets.