© Reuters. A man’s reflection on an electric stock price board outside a brokerage firm in Tokyo, Japan, April 18, 2023. REUTERS/Issa Kato
By Kevin Buckland
TOKYO (Reuters) – Stock markets in the Asia-Pacific region fell on Thursday, extending global stocks’ declines, after the US Federal Reserve reiterated its hawkish stance, while the escalating trade battle between China and the United States also dampened sentiment.
It rose to a new four-month high in Tokyo trading, and the dollar continued its rally against major currencies.
Average shares fell more than 1%, extending their decline from 33-year highs.
Hong Kong shares fell 0.9%, while the mainland blue chips fell 0.2%.
The Australian shares index fell 1% and Taiwanese shares fell 0.7%.
MSCI’s broadest index of Asia-Pacific stocks fell 0.7%, after a 0.4% decline for the global index on Wednesday.
US E-mini stock futures indicated a restart of 0.1% lower, after falling 0.2% overnight.
While nearly all Fed officials agreed to keep interest rates steady last month, minutes from the meeting released on Wednesday showed that the vast majority of expected policy would eventually need to be further tightened.
Money market traders put odds of 85% on a quarter-point increase on July 26, and another 50/50 chance by November.
Meanwhile, US Treasury Secretary Janet Yellen kicked off a trip to China as Beijing imposed restrictions on exports of metals used in semiconductors, adding that the controls were “just the beginning”.
“Equity bulls have soured as Sino-US relations take another step back and investors adjust to the fact that the Fed remains more hawkish than they had hoped,” said Matt Simpson, market analyst at City Index.
“The Fed’s decision to pause was not actually unanimous and most members are ready for further increases, so this could cap the upside in the near term,” though the range of stock declines so far suggests it could be “more than Bump in the road versus blood in the streets.”
Ten-year Treasury yields rose to 3.957% in Tokyo trading, after rising nearly 9 basis points overnight.
It – which measures the currency against six peers, including the euro and the yen – extended 0.23%, down 0.09%, to 103.42 in Asian trade.
Against the yen, though, the greenback’s gains were distinctly subdued, given the currency pair’s traditionally close relationship to long-term US yields.
The dollar fell 0.22% to 144.335 yen on Thursday, reversing the previous day’s advance of 0.13%.
Japanese officials have issued almost daily warnings of JPY weakness as it approaches the 145 level that triggered the intervention last fall. The dollar briefly touched 145.07 yen on Friday.
“The yen is kind of stuck because the Japanese government has raised the alarm level against the currency,” said Naka Matsuzawa, chief strategist at Nomura Securities in Tokyo.
He said that “verbal intent only works for two weeks” without actual intervention in the currency, “and it’s only a matter of time before the yen hits that level of 145” amid rising US yields and a continued pessimistic Bank of Japan stance. .
“The market has no doubts now about the Fed’s policy stance, which is as hawkish as it can be,” Matsuzawa added. “They’re ready to go out a few times, and the bar is pretty low.”
Meanwhile, crude oil was little changed in Asian trading, as prospects of tighter supply with production cuts from Saudi Arabia and Russia and a bigger-than-expected drop in stocks were offset by fears of a slowing demand recovery in China.
Futures fell 2 cents to $76.63 a barrel, after settling 0.5% the day before.
U.S. West Texas Intermediate crude was at $71.90 a barrel, up 11 cents, or 0.2%, after closing 2.9% higher in post-July 4 trading on Wednesday, catching up to Brent’s gains earlier in the week.
