Asian shares eased on Friday, tracking a dive on Wall Street, while the dollar firmed as strong U.S. data revived fears the Federal Reserve will have to retain its hawkish stance to tame inflation.
MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.69%, snapping a two-day winning streak. Wall Street’s major averages closed lower on Thursday with the technology-heavy Nasdaq dropping 2%.
Australia’s S&P/ASX 200 index lost 1.01%, while Japan’s Nikkei opened 1% lower.
U.S. weekly jobless claims data pointed to a still tight labour market, while the economy rebounded faster than previously estimated in the third quarter.
The data from the United States “flamed fears that further monetary policy tightening in 2023 will be necessary to cool inflation,” said Tony Sycamore, a market analyst at IG.
The slew of data, which would normally be viewed positively, has fuelled investor fears that the Fed funds target rate could rise higher and stay there longer than previously expected, raising the possibility of an economic contraction.
China stocks opened lower, while the Hong Kong stock market also fell on recession worries as China grappled with a surge in infections after Beijing abandoned its strict zero-COVID policy to contain the virus.
In the currency market, the Japanese yen weakened 0.20% versus the U.S. currency at 132.61 per dollar, but was on track for its third largest weekly gain this year of more than 3%, after the central bank stunned markets on Tuesday by tweaking its policy on government bonds.
“Investors should prepare themselves for rapid yen appreciation against the dollar once the market sees monetary policy in Japan and the U.S. flipping direction,” Mizuho analysts said.
The spike in the Asian currency came after Bank of Japan’s surprise tweak on Tuesday to allow the 10-year bond yield to move 50 basis points either side of its 0% target, wider than the previous 25 basis point band.
Data on Friday showed Japan’s core consumer inflation in November hit a fresh 40-year high of 3.7% as companies continued to pass on rising costs to households, casting doubts on the BOJ’s view that recent cost-push inflation will prove temporary.
The latest inflation numbers are likely to keep alive market expectations the central bank will further roll back its massive stimulus next year, according to analysts.
The dollar index, which measures the greenback against six other currencies, fell 0.057% to 104.32. The euro was up 0.16% to $ 1.061. Sterling was last trading at $ 1.2034, down 0.07% on the day.
Meanwhile, oil prices rose on expectations of lower Russian crude exports from the Baltic region in December, offsetting worries that a looming Arctic storm across the United States could snuff out transport fuel demand growth this holiday season.[O/R]
U.S. crude rose 1.14% to $ 78.37 per barrel and Brent was at $ 81.82, up 1.04% on the day.
Spot gold added 0.1% to $ 1,793.64 an ounce.
