(Bloomberg) — Asian stocks fell Thursday as sustained dollar strength and weakness in China weighed on the region’s risk appetite. Japanese stocks rose as the yen fell.
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Shares in China and Taiwan traded lower, while those in South Korea and Australia rose. Hong Kong stocks fell amid thin volumes as the market remained open despite signs of bad weather. The dollar index stood at a two-year high, while the 10-year US Treasury yield rose for a third day in Asian trading. US stock futures fell.
Assets in the region have plunged since the US election as investors assess the impact of President-elect Donald Trump’s proposed tariff policies on the region’s growth, while a rising dollar puts pressure on the region’s currencies. . MSCI’s Asia stock benchmark is on track for its worst week since April, while a Bloomberg gauge of Asian currencies has fallen more than 1% so far this week.
“The strength of the US dollar will likely be a key factor” for stocks in the region, said Jun Rong Yeap, strategist at IG Asia Pte. Ltd.
Shares of the region’s chipmakers fell as investors continued to weigh the sector’s prospects following Trump’s victory. Taiwan Semiconductor Manufacturing Co., a major component of the MSCI gauge, fell as much as 1%. SK Hynix, a South Korean chipmaker, sank as much as 6.1%.
Chinese actions can remain within a rank given the signals of the political leaders at the legislative meeting last week that stimulus measures will probably not point to an important reacting of growth, said Kaanhari Singh, head of cross asset strategy of Asia for Barclays, on Bloomberg Television.
“That’s important because it looks like China’s fiscal stimulus could be reactive rather than proactive,” Singh said. “The general theme of the rising dollar is what has been driving risk in the region in currencies and equities.”
US consumer price data was broadly in line with expectations, although the three-month annualized base rate rebounded. The numbers generally supported a possible Fed cut in mid-December, with swaps traders raising the probability to around 80% from around 56% on Wednesday.
The mixed data led to a drop in short-term bond yields, with the two-year bond yield falling five basis points to 4.29%. Treasury yields rose slightly across the curve in Asian trading on Thursday.
The yen fell again against the dollar to reach the weakest level since July. The drop has brought the yen close to levels when Japanese authorities last intervened to shore up its currency, and the country’s top foreign exchange official warned against sudden, unilateral moves.
“We can expect more hawkish talk to follow, but it will probably be difficult to stop the yen’s decline without much concrete follow-through,” Yeap said.
Elsewhere in Asia, yields on China’s new two-part dollar bonds declined and were at a discount to comparable Treasuries in their secondary market debut on Thursday, according to credit dealers. China was able to attract more than $40 billion in bids for its first dollar bond issuance since 2021, or 20 times the bonds on offer, as domestic investors seek higher yields and seek to benefit from tax breaks.
Shares of Tencent Holdings rose as much as 2.8% after the Chinese tech giant posted better-than-expected earnings and described green shoots in the economy in the wake of Beijing’s recent stimulus measures.
Australia’s unemployment rate remained at 4.1% as expected. Other data to be released includes Thai consumer confidence.
Inflation battle
“A December cut is still on the cards,” said Seema Shah of Principal Asset Management. “A higher-than-expected inflation figure could have convinced the Federal Reserve to stay put at its next meeting.”
Several Fed officials reiterated their deep uncertainty about the extent to which the central bank will need to cut interest rates, highlighting the difficulty policymakers face in trying to determine the right environment to keep the economy in balance.
“The impression of the online CPI shows that although substantial advances have been made in the fight against high inflation, the ‘last mile’ is being more challenging,” said Josh Jamner of Clearbridge Investments.
Traders will now shift their attention to US PPI data due later on Thursday, which is expected to show October headline and core producer prices rose year-over-year.
Bitcoin hit another all-time high, topping $93,000 for the first time, and traders were excited about Trump’s rhetorical support for cryptocurrencies. The cryptocurrency was trading around $90,000 in early Asian trading.
In other commodities, oil retreated after Wednesday’s gain. Gold fell for the fifth session.
This week’s key events:
Eurozone GDP, Thursday
US PPI, jobless claims, Thursday
Fed speakers include Jerome Powell, John Williams and Adriana Kugler on Thursday
China retail sales and industrial production, Friday
US Retail Sales, Empire Manufacturing, Industrial Production, Friday
Some of the main movements in the markets:
Stocks
S&P 500 futures were little changed at 12:01 p.m. Tokyo time
Nasdaq 100 futures fell 0.2%
The Japanese Topix rose 0.5%
Australia’s S&P/ASX 200 rose 0.2%
Hong Kong’s Hang Seng fell 0.8%
The Shanghai Composite fell 0.3%
Euro Stoxx 50 futures little changed
Coins
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.2% to $1.0548
The Japanese yen fell 0.3% to 155.96 per dollar
The offshore yuan fell 0.2% to 7.2577 per dollar
Cryptocurrencies
Bitcoin rose 1.8% to $90,194.67
Ether rose 1.8% to $3,212.5.
Captivity
Raw materials
West Texas Intermediate crude fell 0.3% to $68.23 a barrel
Spot gold fell 0.5% to $2,560.81 an ounce.
This story was produced with the help of Bloomberg Automation.
