(Bloomberg) — Asian shares fell as traders pondered the sustainability of a tech-driven rally that has pushed a key benchmark to a nearly two-year high. The offshore yuan weakened to its lowest level this year.
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Japanese and Chinese stocks led the weakness among regional stocks. The MSCI Asia Pacific Index fell as much as 0.4% after Wednesday’s 1% gain, as renewed optimism about artificial intelligence boosted most markets. Technology stocks in the region struggled, with the Hang Seng Tech Index down more than 1%. Futures on the S&P 500 moved higher.
The People’s Bank of China set the yuan’s daily benchmark interest rate at its weakest level since November, a signal that policymakers are loosening their grip on the currency. The Japanese yen swung between gains and losses after a five-session decline, closing above 158 against the dollar. A Bloomberg index of the dollar’s strength was little changed.
Asian shares are taking a breather and “need an adrenaline shot from another night of record highs on Wall Street,” said Tony Sycamore, market analyst at IG Australia. More importantly, Japanese traders are likely “fearful of a new round of currency intervention that will send USD/JPY lower, and with it the Nikkei.”
Yields on US government bonds and Australian government bonds rose slightly, following gains in their European counterparts. There was no trading in government bonds on Wednesday due to a US holiday.
Futures contracts on Chinese 10-year bonds rose to a record high. The bonds came into the picture after PBOC Governor Pan Gongsheng gave the clearest indication yet that the central bank would start trading government bonds on the secondary market. Ten-year government bond futures closed at a record high on Wednesday.
New Zealand government bond yields rose after the country’s economy emerged from recession with modest growth in the first quarter. Gross domestic product rose 0.2% from the previous quarter, exceeding economists’ estimates of 0.1% growth.
“While the data may be volatile, markets are interpreting it as a reduction in the likelihood of early rate cuts,” said David Croy, strategist at Australia & New Zealand Banking Group in Wellington.
Despite Thursday’s tepid moves, MSCI’s Asian stock index is trading near its highest level since March 2022. Wall Street, meanwhile, has been lifted by the continued AI frenzy and resilient economic growth that should continue to support corporate profits, especially in the technology sector .
Questions are being raised about what could derail the stock market rally as “things are not so rosy under the hood, where index market breadth has been poor and participation has been disappointing, suggesting the rally has been built on shaky foundations” , says Chris Weston, head of the exchange. of research at Pepperstone Group in Melbourne. “It has simply been a difficult proposition to bet against AI in its various guises – so until we lose these giants, index-level pullbacks are likely to be shallow and well-supported.”
In business news, shares of Guzman y Gomez Ltd., a Mexican-themed fast-food chain, rose as much as 38% in its trading debut in Australia, following the country’s biggest initial public offering in nearly a year.
In the commodities sector, oil lost ground ahead of the release of weekly US inventory data, which could point to another rise in national crude inventories. Gold moved higher after closing the previous session, but little changed.
Main events this week:
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Consumer confidence in the eurozone, Thursday
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British BOE interest rate decision, Thursday
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US housing market opens, first unemployment claims, Thursday
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Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday
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Sales of existing homes in the US, Conf. Board leading index, Friday
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The Fed’s Thomas Barkin will speak on Friday
Some of the major moves in the markets:
Shares
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S&P 500 futures rose 0.2% as of 1:18 p.m. Tokyo time
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Nasdaq 100 futures rose 0.5%
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Japan’s Topix fell 0.5%
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Australia’s S&P/ASX 200 fell 0.2%
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Hong Kong’s Hang Seng fell 0.5%
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The Shanghai Composite fell 0.3%
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Euro Stoxx 50 futures rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0743
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The Japanese yen was little changed at 158.11 per dollar
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The offshore yuan was little changed at 7.2836 per dollar
Cryptocurrencies
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Bitcoin rose 0.4% to $65,101.78
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Ether was little changed at $3,548.74
Bonds
Raw materials
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West Texas Intermediate crude fell 0.2% to $81.37 a barrel
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Spot gold rose 0.3% to $2,334.86 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Matthew Burgess.
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