Rosalind Evans
Asian markets predominantly dipped on Friday, influenced by the upsurge in Wall Street bond yields, sparking concerns about persistent high-interest rates in the U.S.
July’s data from Japan highlighted a 3.1% year-on-year consumer price increase, slightly down from June’s 3.3%, but surpassing some analysts’ projections of 2.5%. This rise exceeds the Bank of Japan’s 2% target. The core Consumer Price Index (CPI), which excludes volatile energy and fresh food costs, experienced a year-on-year climb of 4.3%, as reported by Japan’s Ministry of Internal Affairs and Communications.
Key index movements in the Asian market include:
– Japan’s Nikkei 225: Down 0.2% to 31,565.21
– Australia’s S&P/ASX 200: Up 0.1% to 7,155.00
– South Korea’s Kospi: Down 0.5% to 2,506.56
– Hong Kong’s Hang Seng: Down 1.2% to 18,110.52
– Shanghai Composite: Decrease of 0.1% to 3,161.97
Worries persist about China’s economic recovery post-COVID, with indicators like the devaluing yuan and distressed property developers raising concerns. As Tim Waterer of KCM Trade points out, optimism surrounding China’s economy is scarce.
Wall Street indices experienced declines, with August shaping up as their toughest month this year. Higher bond yields, reaching 4.28% for the 10-year Treasury (the highest since October), make equities less attractive, posing challenges for stockholders while benefiting bond investors. These increasing yields, a result of a sturdy U.S. economy, might induce the Federal Reserve to sustain high-interest rates, affecting aspects from corporate profits to mortgage rates.
Recent U.S. economic data have been promising, showing fewer unemployment claims and unexpected growth in manufacturing. However, with interest rates at their highest in over two decades, there are apprehensions about future Fed rate hikes. While inflation has slowed since last summer’s peak, achieving the Fed’s 2% target remains a daunting task.
On the energy front, oil prices are recovering. Notably, Exxon Mobil and ConocoPhillips observed share price increases of 1.9% and 1.8% respectively.
In currency exchange, the U.S. dollar experienced a minor decline against the Japanese yen, while the euro saw a slight decrease in its value.
In the global panorama, as Asian markets respond to U.S. economic cues, investors worldwide brace for potential fluctuations. With concerns over inflation, interest rates, and economic recovery interplaying, the balance between optimism and caution remains tenuous. All eyes will be on the Federal Reserve’s next moves, China’s economic recovery, and the ongoing global energy dynamics, marking a crucial phase for global financial markets in the upcoming months.
