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Asian stocks retreat after US shares hit record: markets wrap

Asian stocks retreat after US shares hit record: markets wrap
A woman walks past an exchange office with an electronic panel displaying currency exchange rates for US dollar and Euro against Russian ruble in Moscow, Russia, 14 August 2023. (Photo: EPA-EFE / Sergei Ilnitsky)

Equities in Asia backtracked on Friday after US stocks hit yet another record, and as investors parsed economic data for signals on interest-rate trajectories around the world.

Shares in Australia and Korea fell, while Japanese stocks nudged higher. Hong Kong and China both opened lower. The moves followed Thursday’s sharp rally for a gauge of the region’s shares, which touched the highest level in almost two years.

Contracts for US stocks rose in early Asian trading after the S&P 500 index advanced 0.3% to a fresh high on Thursday — its 20th of the year — led by gains in industrials and banks. Reddit Inc. shares soared 48% on their debut. 

“This week, the Reserve Bank of Australia, the Federal Reserve, the Swiss National Bank, and the Bank of England joined for the dovish chorus,” said Tony Sycamore, market analyst with IG Australia Pty Ltd. “The song tells the story of central banks being less concerned with inflation and more concerned with growth. It concludes with expectations of rate cuts being reinforced and growth prospects backstopped.”

Some US tech stocks faltered, with Apple Inc. and Alphabet Inc. falling against the backdrop of heightened regulatory pressure. The US Justice Department and 16 attorneys general are suing the iPhone maker for violating antitrust laws. 

US economic data supported the argument that the Fed may be forced to backtrack on its rate-reduction forecasts a day after the central bank indicated three 25-basis-point cuts in 2024. Housing, manufacturing and labour-market data released on Thursday in the US pointed to a resilient economy that could prompt the Fed to reduce interest rates slower than the market expects.

Treasuries and an index of the dollar were both steady on Friday. 

The yen was little changed, trading around 152 per dollar as Japan’s inflation accelerated to the quickest pace in four months. Markets will stay focused on whether the Bank of Japan might follow its first interest rate hike since 2007 with further increases later this year.

The onshore yuan fell to its weakest in four months, breaching a closely-watched technical level after a months-long effort by Chinese authorities to keep the managed currency in a narrow range

Raising forecast

Societe Generale SA increased its S&P 500 year-end forecast to 5,500 from 4,750 — the highest forecast among strategists tracked by Bloomberg. “US exceptionalism is going from strength to strength,” wrote Manish Kabra, head of US equity strategy for the French bank. “Despite widespread market optimism, we view this as rational rather than excessive.”

Central banks remained firmly in focus. The Swiss National Bank unexpectedly cut interest rates on Thursday, weakening its currency against peers, while Mexico’s central bank cut rates as predicted. The Bank of England kept rates at a 16-year high of 5.25%. 

The Reserve Bank of Australia released a financial stability review on Friday.

Ahead in Asia, Taiwan will publish its February jobs data.

In commodities, oil held a two-day drop, with traders assessing the outlook for global interest rates and geopolitical tensions in the Middle East. Elsewhere, Bitcoin traded below $66,000, while gold fell after surging above $2,200 an ounce for the first time.

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