Chinese and Hong Kong flags are seen at the waterfront during a foggy day in Hong Kong, China, March 6, 2024. (Photo: REUTERS/Tyrone Siu/File Photo) MSCI’s Asia Pacific Index fell 0.4% following a 1% gain on Wednesday, when renewed optimism over artificial intelligence lifted most markets. Japanese stocks fell the most among national benchmarks, while a gauge of Chinese tech shares in Hong Kong dropped more than 1%. S&P 500 futures edged higher.
The People’s Bank of China set the yuan’s daily reference rate at its weakest since November in a sign policymakers are loosening their grip on the currency. The Japanese yen was flat following a five-session drop, which saw it close above 158 against the dollar. A Bloomberg index of dollar strength was little changed.
Asian stocks are taking a breather and “need an adrenaline shot of another night of record highs on Wall Street,” said Tony Sycamore, market analyst at IG Australia. More crucially, Japanese traders are likely “scared about another round of currency intervention which will send USD/JPY lower and with it the Nikkei.”
US Treasury and Australian bond yields edged higher, following a rise in their European peers. There was no trading of Treasuries on Wednesday due to a US holiday.
Chinese bonds remained in focus 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.
The New Zealand dollar and government bond yields advanced after the nation’s economy exited a recession with modest expansion in the first quarter. Gross domestic product gained 0.2% from the previous quarter, beating economist estimates of 0.1% growth.
“Although the data can be volatile, markets are reading it as lessening the odds of early rate cuts,” said David Croy, a strategist at Australia & New Zealand Banking Group in Wellington.
Despite Thursday’s tepid moves, MSCI’s gauge of Asian stocks is trading near its highest since March 2022. Wall Street, meanwhile, has been lifted by the continued AI frenzy and resilient economic growth that should continue to support corporate earnings, especially in the technology sector.
Questions are rising on what could derail the stock rally given “all is not so rosy under the hood, where index market breadth has been poor, with participation underwhelming, suggesting the rally has been built on a shaky foundation,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “It has simply been a tough trade to bet against AI in its various guises - so until we lose these behemoths then pullbacks at an index level will likely be shallow and well-supported.”
In corporate news, shares of Guzman y Gomez Ltd., a Mexican-themed fast-food chain, jumped as much as 38% in its trading debut in Australia following the country’s largest initial public offering in almost a year.
In commodities, oil lost ground ahead of the release of weekly inventory data from the US that may show another rise in nationwide crude inventories. Gold edged higher after closing the previous session little changed.