MSCI’s broadest index of stocks in the Asia-Pacific region outside Japan fell 1.2% in early Asian trading, led by declines of 1.5% in Hong Kong, 0.8% in Australia, resource-rich country, and 1.6% in South Korea.
The Japanese Nikkei fell 1.2%.
Hong Kong-priced tech gloves were hit hard, with their sub-index opening down 2.9%. Shares of Alibaba Hong Kong fell 3.3% after its subsidiary Ant Group said it had no plans to launch an initial public offering. This was a response to media reports that Beijing had approved the relaunch of the IPO.
Shares of Alibaba in the United States slid 8.1% overnight.
Market sentiment in China was clouded by new restrictions in Beijing and Shanghai as new cases of COVID-19 emerged. Multiple districts in Beijing have shut down entertainment venues, while most Shanghai citizens face new rounds of mass testing to prevent another outbreak.
The European Central Bank on Thursday ended a long-running stimulus program and said it would make its first interest rate hike since 2011 next month, followed by a potentially larger move in September.
While the ECB’s decision was widely expected, the possibility of a bigger hike in September weighed on sentiment. The eurozone economy is struggling with slowing growth and runaway inflation exacerbated by a months-long war in Ukraine.
“Global equities came under pressure after the ECB gave guidance, and (ECB President Christine) Lagarde noted upside inflation risks,” ANZ analysts said in a note on Friday. .
“And with energy prices still rising, it’s not yet clear that inflation has peaked. The Fed’s policy guidance and actions may need to become more hawkish for longer. Financial markets are nervous.”
For months, markets have focused on the speed of action by central banks to curb inflation. Investors now expect the Federal Reserve to raise interest rates by 50 basis points next week, especially if Friday’s US consumer price data confirms high inflation.
Consensus calls for a year-on-year inflation rate of 8.3% for May, unchanged from April.
Wall Exchange shares fell as the market waited for price data. The S&P 500 and Nasdaq fell more than 2%, their biggest daily percentage declines since mid-May, with growth mega-caps leading the way.
Apple Inc and Amazon.com Inc fell 3.6% and 4.2%, respectively.
While some investors were hoping inflation might have peaked, the recent rise in oil prices, which hit a 13-week high, has dented that optimism, adding to the appeal of the safe-haven dollar.
In currency markets, the US dollar maintained its overall strength against a basket of major currencies, hovering around its highest level in three weeks. The euro remained at its lowest level for 2 and a half weeks, while the yen gained 0.16% against the greenback, thus moving away from its lowest level for 20 years.
On Friday, movements in US Treasury bills were very muted. The yield on the benchmark 10-year Treasury bond rose slightly to 3.0566% from its US close of 3.042% on Thursday.
The two-year yield, which rises on traders’ expectations of a hike in federal funds rates, hit 2.8319%, versus a US close of 2.817%.
Oil prices fell after parts of Shanghai imposed new containment measures. Nonetheless, strong gains in refined products supported crude prices near three-month highs.
US crude futures were down 0.16% at $121.33 a barrel and Brent was down 0.2% at $122.81.
Gold fell slightly on Friday and is heading for a weekly decline as Treasury yields rise. Spot gold traded at $1,846.4949 per ounce. [GOL/]