A worker sprays water on an Olympic installation in southeastern Seoul, South Korea, 13 March 2024, to remove dirt as part of springtime cleaning. (Photo: EPA-EFE/YONHAP SOUTH KOREA OUT) The MSCI Asia Pacific Index dropped 0.4%, weighed down by South Korean and Hong Kong shares while those in Japan rose. The dollar is set to rise for a fifth straight week. US stock futures were steady as traders geared up for an options expiry later on Friday.
The weakness comes as the S&P 500 briefly topped 5,500 on Thursday before losing traction, while the high-flying tech group powering the bull run came under pressure. The Nasdaq 100 slipped after a seven-day advance with Nvidia and Apple leading losses in megacaps.
“The selloff in US tech overnight is weighing,” said Chamath de Silva, senior fund manager at BetaShares Holdings in Sydney. “We’ve also had some broad USD strength in recent sessions, which often weighs on Asian equities.”
In Japan, inflation accelerated after the government increased renewable energy-related levies, a result that backs the case for the central bank to consider raising interest rates in coming months. Policymakers left them unchanged and declined to give details on paring bond purchases at their meeting a week ago.
The yen traded around 159 per dollar, its weakest in almost two months. That ramped up the risk Japanese officials will once again step into markets to prop up the currency. Masato Kanda, the nation’s top currency official, said that there’s no change in his stance to take appropriate measures if there are excessive currency moves.
Read More: US Adds Japan to FX Watchlist Amid Global Strain of Firm Dollar
Elsewhere in Asia, MSCI kept South Korea classified as an emerging market after a short-selling ban offset the country’s efforts to get upgraded to developed status. China’s solar-related shares advanced after the nation promised to guide capacity expansions and avoid redundant investments in the sector.
Economic softening
After coming close to erasing this year’s losses, Treasuries edged lower in Asia, extending Thursday’s decline despite data that mostly pointed to economic softening. New home construction slumped to the slowest pace in four years and the Philadelphia Fed Index trailed estimates. US initial jobless claims were little changed. Federal Reserve Bank of Minneapolis President Neel Kashkari said the central bank will return inflation to 2%, but estimated it will likely take a year or two to do so.
Traders will soon be looking to purchasing managers index data in Europe and the US for signs of improving economic activity and waning cost pressures. The US data will be the most influential for markets, with close attention paid to the price subindex, said Kyle Rodda, an analyst at Capital.com in Melbourne.
“A Goldilocks scenario is if the headline number shows greater growth momentum, but the price index continues to fall, especially in the services sector,” he said. “Evidence of stubborn price pressures may water down hopes for rate cuts.”
Wall Street will also ready for a quarterly event known as triple witching — in which derivatives contracts tied to equities, index options and futures mature — compelling traders en masse to roll over their existing positions or to start new ones. About $5.5-trillion are set to expire on Friday, according to an estimate from options platform SpotGamma.
Traders will also be keeping an eye for signs of increasing global trade tensions as Western powers take strides to curb Chinese electric vehicle exports. Prime Minister Justin Trudeau’s government is preparing potential new tariffs on Chinese-made EVs to align Canada with actions taken by the US and European Union, according to people familiar with the matter.
In commodities, oil headed for the first back-to-back weekly gain since early April as a surprise draw in US inventory levels, coupled with signs of robust product demand, signalled buoyant conditions in the world’s top consumer. Gold was steady, poised to further gains into a second week.