A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, July 28, 2021. (Photo: Michael Nagle/Bloomberg) A gauge of Asian tech stocks fell as much as 3.2% after the Nasdaq 100 dropped 2.2% on Thursday on slowing inflation data that supported the case for rate cuts, triggering a rotation out of large-cap tech.
Equities in Australia and China rallied as a gauge of Chinese property developers rose around 5%, on pace for its best day since May. Shares in the tech-heavy markets of South Korea and Japan fell, with the latter weighed down by the yen’s Thursday advance against the dollar.
The Japanese currency whipsawed on Friday leaving traders on edge amid speculation that authorities had stepped in with official support. The Bank of Japan conducted so-called rate checks in the currency market, a precursor to possible intervention, a trader with direct knowledge of the event told Bloomberg News.
“Now they’ve shown their hand and they’ve intervened, they kind of have to continue to intervene just to maintain the credibility of that intervention,” Adarsh Sinha, co-head of Asia FX & Rates strategy at BofA Securities said on Bloomberg Television regarding Japan’s finance ministry. “It’s still a tough task.”
Treasuries moderated a Thursday rally in early Friday trading. The prospect of lower US interest rates had sent 10-year Treasury yields seven basis points lower to 4.21% in the prior session.
A gauge of the dollar was steady after falling Thursday by the largest margin since May. Australian and New Zealand government bonds opened higher.
Fed Bank of Chicago president Austan Goolsbee described the CPI data as “excellent,” saying the report provided the evidence he’s been waiting for to be confident the central bank is on a path to its 2% goal.
To Chris Larkin at E*Trade from Morgan Stanley, Thursday’s “Fed-friendly CPI” was another step toward a September rate cut. A lingering question is whether this high-flying stock market has already priced in multiple cuts, he noted.
US small-cap stocks were among primary beneficiaries. The Russell 2000 of smaller firms beat the Nasdaq 100 by 5.8 percentage points on Thursday — the most since November 2020.
Neuberger Berman Group’s Steve Eisman expects the outsized strength in US megacap technology shares will “last for years,” as artificial intelligence becomes more accessible to consumers via electronic devices.
“You have to own the big, large-cap tech stocks,” he told Bloomberg Television in an interview on Thursday.
In Asia, economic reports due Friday include China trade, Japan industrial output and Indian inflation. China money supply and new loans data may also be released as soon as Friday.
West Texas Intermediate oil rose for a third day Friday, helped along by the CPI. Gold fell after a sharp rally on Thursday.