Mainland China and Hong Kong shares traded in tight ranges as a further drop in Chinese producer prices and tepid consumer prices bolstered speculation that the government will need to offer more support. 

Japanese stocks snapped a two-day decline while Australian shares rebounded after falling in the prior three sessions. South Korean equities are at the highest since June last year. 

“You need to see a much higher growth rate in China versus the US in order to justify moving back into China given the geopolitical risks and the lack of policy stimulus,” Thomas Taw, head of Asia Pacific iShares investment strategy at BlackRock, said in an interview with Bloomberg Television.

Contracts on US indexes inched lower in early trading in Asia. Treasury yields were steady after declines on Thursday. Government bond yields fell in Australia and New Zealand.

A jump in US jobless claims to the highest since October 2021 suggests the labor market is starting to cool, which helped to fuel tech stocks. They had faced headwinds from speculation of the Federal Reserve keeping interest rates higher for longer. 

The S&P 500 added 0.6% and the tech-heavy Nasdaq 100 rose 1.3% on Thursday as chipmakers including Nvidia Corp. and Advanced Micro Devices were among the biggest gainers amid the frenzy in stocks linked to artificial intelligence. 

Investors are reassessing the trajectory of Fed policy after central banks in Australia and Canada this week unexpectedly raised rates. Traders had fully priced in another hike by July on Wednesday. However, Evercore ISI’s Krishna Guha said market moves based on those central bank actions should fade. 

“The Fed is the price-setter here, the others are the price-takers, and we should not confuse the two,” Guha said. “They are raising rates in part because they think the Fed will hike once more and if they fail to match this they risk FX depreciation.”

Elsewhere in markets, the yen weakened slightly after a rally Thursday when data showed Japan’s economy grew faster than expected in the first quarter. 

The Bloomberg Commodity Index headed for its first weekly advance since mid-April as gains in gold and iron ore helped offset a second weekly slide in oil, which shrugged off Saudi Arabia’s pledge to cut output.

The Turkish lira weakened after the country’s President Recep Tayyip Erdogan named Hafize Gaye Erkan, a former executive of Goldman Sachs Group Inc and First Republic Bank, as the new central bank governor. There are indications the new economic team is abandoning a costly intervention strategy as part of an expected turn toward more conventional policies. DM