HONG KONG (Reuters) – Asian shares failed to latch on to a global record-setting rally on Friday, held back by Chinese property stocks, while the dollar stood tall following a week in which central banks around the world refrained from any hawkish surprises.
The U.S. currency made solid strides against sterling, which took a beating after the Bank of England confounded markets by passing up a chance to raise interest rates on Thursday.
MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.14% and was flat on the week, while Japan’s Nikkei fell 0.7%, albeit from a month high reached the day before, as manufacturers’ earnings disappointed. [.T]
In contrast, share markets globally are in strong form and MSCI’s gauge of stocks across the world hit an all-time high on Thursday, posting its fourth consecutive record closing high.
The world benchmark was flat in Asian hours, while U.S and European futures were steady, with pan-region Euro Stoxx 50 futures gaining 0.08% and U.S. S&P 500 e-minis unchanged.
The gains came even after the U.S. Federal Reserve on Wednesday finally announced that it would begin tapering its massive asset purchase programme, though Fed Chair Jerome Powell said he was in no rush to hike borrowing costs.
“Even though it transpired as expected, it is a significant milestone, the direction of travel is now clearly towards policy normalisation, though the Fed emphasised that tapering is not tightening,” said Stefan Hofer, chief investment strategist for LGT in Asia Pacific.
“It was really expert communication and very well handled”
Hofer said U.S. jobs data would remain in focus in the coming months as that would influence upcoming decisions from the Fed. U.S. payroll data for October is due later on Friday.
Back in Asia, Hong Kong weighed on the regional index, falling 1.25%, pressured by index heavyweight HSBC as the rate sensitive bank’s shares tumbled 5%, hurt by the BoE’s dovish call, as well as by property stocks.
Also in Hong Kong, trading in shares of Chinese developer Kaisa Group Holdings Ltd was suspended, a day after the company said a subsidiary had missed a payment on a wealth management product, the latest sign of a deepening liquidity crisis in the Chinese property sector.
An index tracking Hong Kong listed mainland Chinese developers slipped 2.4 %, and an onshore China property index lost 2%.
More broadly, Shanghai shares lost 0.6% though Chinese blue chips slipped 0.3%.
While investors were happy with the Fed’s communications, several felt that they had been misdirected by policymakers at the BoE, which surprised markets by deferring an interest rate hike at a meeting Thursday.
On Friday, the pound was nursing its wounds near a month low having tumbled 1.36% the previous day following the central bank’s decision, which also roiled bonds in Britain and across Europe more broadly.
The dollar index last stood at 94.327, within sight of October’s 12-month highs, after the U.S. currency also gained ground on the euro.
Alongside the moves in European government bonds, the U.S. yield curve steepened on Thursday and U.S. benchmark 10-year yields dropped to 1.509%, their lowest level since mid-October.
Yields later recovered some ground, and 10-year notes last yielded 1.5386%.
Oil reversed course and gave up some of Friday’s early gains.
U.S. crude rose 0.34% to $79.05 a barrel, while Brent crude lost 0.1% to $80.44 per barrel, back near month lows hit a day earlier following a report that Saudi Arabia’s output would soon surpass 10 million barrels per day for the first time during the COVID-19 pandemic.[O/R]
Spot gold tacked on 0.1% as the falling yields provided support to the non-interest bearing asset.
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