SINGAPORE (Reuters) – Asian stock markets plunged to their worst week in a month and a half on Friday, with crude falling while bonds fell as U.S. data and earnings showed bearish signs. It hit a new high in several weeks.
Overnight figures showed that Americans filing for unemployment benefits and manufacturing activities in the mid-Atlantic region fell to their lowest level in nearly three years.
Following other signals that the world’s largest economy is slowing, the data trailed the forerunner of global activity, Brent crude oil futures, down 2.4% on its steepest day in five weeks.
US Treasurys rallied and 2-year yields fell more than 9 basis points overnight as investors turned to safety and bet that the US rate hike cycle is almost over.
Earlier in the Asian day, MSCI’s broadest index of Asia-Pacific stocks outside of Japan fell 0.3% over the week to 1%. It was the worst performance since bank stability concerns hit the market in mid-March.
Tapas Strickland, head of market economies at National Australia Bank, said: “The rising trend in unemployment claims is a clear sign of a slowing labor market and the prospect of a US recession in 2023. I’m showing my point of view,” he said.
The US leading economic index, a measure of future economic activity, also fell overnight to its lowest level since November 2020, signaling a recession starting in mid-2023.
The S&P 500 also fell overnight with some strong selling on a weak result. Tesla shares fell 9.7% after the electric car maker posted its lowest quarterly gross margin in two years. AT&T shares fell 10.4% after the wireless carrier underperformed earnings and cash flow estimates.
Signs of a slowdown are also weighing on the US dollar as traders bet about 50 basis points on US rate cuts this year.
Asian trade was weak, but the euro remained near last week’s one-year high of $1.0971.
The yen held at 134.11 to the dollar, but the New Zealand dollar fell to $0.6162 on Thursday’s lower-than-expected inflation data.
The Nikkei 225 Stock Average hits an eight-month high, continuing its second consecutive week of gains.
Japan’s corporate governance has suddenly become famous, seemingly awakening the world’s third-largest stock market from decades of lethargy.
“Value trading is working,” said Puneet Singh, director of quantitative research at Societe Generale in Singapore.
“If you’re buying value in Japan, if I’m looking at (price-to-earnings ratio) and you’re only buying names with cheap P/E, then you’ve outperformed the market.”
Japan’s consumer price index has steadily beaten the central bank’s March target, according to Friday’s data, prompting markets that the BOJ may phase out its massive bond-buying policy to keep bond yields down. betting continues.
Japanese yields were broadly stable on Friday, avoiding a lead from the US overnight. The Bank of Japan will meet next week.
“Market participants appear to be taking positions ahead of the meeting in anticipation of policy changes,” said Nomura strategist Naka Matsuzawa, but does not expect any changes.
“Unless financial turmoil in the US and Europe worsens again, I think the June meeting is likely to be the time for changes.”
Elsewhere, the mood has dragged bitcoin below $30,000, while falling yields support non-income-paying gold at $2,002 an ounce.
In the commodities market, traders are closely watching the reactions of producers and buyers to plans to nationalize Chile’s lithium industry. Chile holds the world’s largest reserves.
In the oil market, at $80.79 a barrel, Brent also broke below the 50-day moving average for the first time. This is because oil producers unexpectedly announced additional production cuts two weeks before him.
(Edited by Shri Navaratnam)