Saturday Oct 14 2023 00:10
4 min
On Friday, major stock indexes across Asia, such as Hong Kong’s Hang Seng Index and Japan’s Nikkei 225, retreated as concerns about inflation resurfaced, raising the likelihood of additional interest rate hikes in the coming months.
Stocks throughout the region were on track to experience their most significant one-day percentage decline in a week.
The drop was prompted by a hotter-than-expected inflation reading in the U.S., which reinforced the case for the Federal Reserve (Fed) to maintain higher interest rates for a longer period — a policy stance that has become widely known as “higher for longer”. The US annual inflation rate remained steady at 3.7%, slightly above the market consensus of 3.6%, while the monthly rate eased less than expected to 0.4%.
The U.S. dollar rose on the CPI inflation reading, with the DXY dollar index rallying to 106.5.
The minutes from the Fed’s recent meeting, released on Wednesday, revealed the central bank's intention to maintain interest rates at elevated levels for "some time” to bring inflation back into line with the 2% target.
Markets.com Chief Market Analyst Neil Wilson provided a brief overview of the FOMC minutes in his morning overview on Thursday.
Japanese stocks declined on Friday, mirroring the losses experienced by Wall Street following the release of the stronger-than-expected U.S. inflation figures, which heightened expectations for a more hawkish Fed.
Nonetheless, losses on Japan's primary Nikkei 225 Index were moderated by a substantial 5.75% surge in heavyweight Fast Retailing, the owner of the Uniqlo brand, following a robust earnings report, as reviewed by Nikkei Asia.
The Nikkei ended the day with a 0.55% decline, closing at 32,315.99 and ending a three-day winning streak. Among the Nikkei's 225 components, only 15 registered gains, while 208 recorded losses and two remained unchanged. The broader Topix index fell by 1.44%.
Despite the notable selloff on Friday, the Nikkei still achieved a 4.26% gain for the week, breaking a three-week streak of losses.
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The Hang Seng index saw a decline of 424.76 points or 2.33% on Friday, closing at 17,813.46 and snapping a six-day winning streak and retreating from its highest closing point in over a month, primarily driven by growing concerns about the fragility of the economic recovery in China.
Official data revealed that China's Consumer Price Index (CPI) remained unchanged year-on-year in September, approaching the deflationary levels observed in July, as per a CNBC report. The index was also impacted by Chinese trade data showing a 6.2% decline in both exports and imports for the month, reflecting weak global and domestic demand, as highlighter by AP News.
The tech sector bore the brunt of the decline, falling by nearly 3.5%, followed by property, consumer-related stocks, and financials.
Multiple companies, including Chow Tai Fook Jewellery (-5.5%), Tingyi Cayman Holdings (-5.2%), Meituan (-3.2%), and Tencent (-3.1%), saw significant drops.
Despite the sizeable losses, the Hang Seng index recorded a 1.9% total weekly increase — its first rise in four weeks. This boost was influenced by Beijing's intention to issue more debt for increased infrastructure construction and its recent efforts to restore investor confidence.
When considering indices or shares for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.
Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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