The yen slid to its lowest level versus the dollar since 1990 after a hawkish Bank of Japan board member said financial conditions will stay accommodative. The slump fanned speculation that the nation will step up its efforts to stem the decline, and pushed equity indexes to near their record highs.

Shares retreated in China, Hong Kong and Korea, with technology companies accounting for the majority of the losses. The decline came as the region’s AI-linked companies mirrored the overnight fall in Nvidia’s shares, and as Alibaba’s plan to shelve listing of its logistics arm soured sentiment.

“Risk sentiment is attempting to stabilise following recent profit-taking,” said Jun Rong Yeap, strategist at IG Asia Pte. “Asian equities are shaping up to close the quarter on a more positive note, as the bears have been struggling to find much catalyst to dent the broader risk-on environment for now.”

Japan’s Nikkei 225 is one of few Asian equity benchmarks that are able to match the pace of the US rally — advancing more than 20% this year and on track for one of its best quarters ever. Hong Kong has been unable to fully recover after plunging at the start of the year and is set for a slight decline in the three-month period ending March, while Sydney is set to post a modest gain. 

Even the recent advance in Chinese stocks will likely be tested, as key financial institutions announce earnings, starting with Industrial & Commercial Bank of China Ltd. later on Wednesday.

Alibaba Group Holding Ltd. declined in Hong Kong, the biggest contributor to Hang Seng Index’s decline, after the company called off a $1-billion-plus initial public offering for its Cainiao logistics arm. Chinese EV giant BYD Co. also fell after reporting 2023 profit that missed estimates.

Meanwhile, Apple Inc.’s iPhone shipments in China dropped about 33% in February from a year ago, according to official data, extending a slump in demand for the flagship device in its most important overseas market. 

US stock futures, meanwhile, pointed to gains after the S&P 500 declined for a third day. The US equity benchmark is on track to notch five straight months of gains, but now traders are debating whether the road gets rougher for the $4-trillion rally to keep chugging along as stock valuations remain elevated relative to history. 

Cocoa surge

Treasuries steadied in Asian trading after rebounding from session lows on Tuesday following a $67-billion sale of five year-notes. The yen slumped to the lowest level in about 34 years against the greenback on expectations Japan’s wide yield gap with the US will remain even though the Bank of Japan has ended its negative interest rate policy.

The dollar was marginally stronger against its G10 peers, while the offshore yuan was little changed after the People’s Bank of China once again boosted support for the currency.  

Profits at China’s industrial companies increased in the first two months of the year, extending a gaining streak since August and adding to positive signs in the economy.

Cocoa futures surged above an unprecedented $10,000 a metric ton on Tuesday before erasing gains and taking a breather from a historic rally that has seen prices of the key chocolate ingredient double this year.

Oil extended a modest decline after an industry report pointed to a sizable build in US inventories, and wider markets struck a weaker tone ahead of the end of the quarter. Gold fell, but traded close to its record.

As traders geared up for the Fed’s preferred inflation gauge on Friday — when markets will be closed — they parsed the latest economic readings. US consumer confidence held steady, durable goods orders climbed while home-price growth accelerated at the fastest rate since 2022.

For equities to warrant their gains in recent months, global central banks must ease monetary policy this year and companies have to deliver healthy earnings growth, according to JPMorgan Chase & Co.’s Marko Kolanovic.