HONG KONG: Most markets fell Friday as a weakening economy and disappointing earnings from tech giants offset signs that central banks could begin slowing their interest rate hike campaign.
After being battered for most of the year by worries that borrowing costs will continue to rise to fight inflation, traders were cheered by a report last week indicating the US Federal Reserve could take its foot off the gas soon.
That was followed by comments from policymakers hinting as much, while a string of data suggesting the world’s top economy was feeling the impact of higher rates also gave the bank room to manoeuvre.
Meanwhile, a below-expectation increase by the Bank of Canada this week and the signs the European Central Bank could take a less hawkish turn helped fuel speculation of a softer outlook for rates, helping push government bond yields down around the world.
Focus is now on the Fed’s next policy decision on Wednesday.
While it is widely tipped to announce another bumper hike, traders will be poring over the post-meeting statement for clues about its plans for December and 2023, with hopes it will indicate a slower pace.
Data showing the US economy grew more than expected was tempered by underlying figures showing, among other things, consumer spending – the key driver of growth – remained fragile.
“The notion ‘bad news is good news’ is increasingly driving price action as Fed hikes expectations are lowered in the face of weaker data,” said SPI Asset Management’s Stephen Innes.
Asian markets rally with Wall St on rate hope, healthy earnings
“Bank of Canada’s surprise 50 basis point hike on Wednesday, coupled with a less hawkish forward guidance from the ECB… added to the idea that peak tightening globally has passed.”
However, Wall Street ended on a mixed note, with the Nasdaq losing more than one percent after forecast-missing earnings this week from some of the world’s biggest firms including Apple, Amazon, Facebook parent Meta and Google parent Alphabet.
“A lot went wrong for big-tech… Apple’s holiday outlook underwhelmed, inflation pain is more noticeable, and unfavourable exchange rates will hurt future sales,” said OANDA’s Edward Moya.
“The key theme across this round of mega-cap results is that an earnings slump is here as inflation cripples an already weak consumer.”
The losses filtered through to Asia where tech was again in the firing line. They were felt particularly in Hong Kong, where the Hang Seng Index shed more than one percent – at the end of a bruising week hit by worries that Xi Jinping’s tightened grip on power in China could see more crackdowns on the sector.
There were also losses in Tokyo as investors await a fresh stimulus package local media said could be worth as much as $200 billion as the government tries to kickstart the economy and cushion the country from inflation and the weaker yen.
The yen was slightly lower against the dollar Friday, though it has bounced since hitting a fresh 32-year low last week.
Key figures around 0230 GMT
Tokyo - Nikkei 225: DOWN 0.4 percent at 27,248.20 (break)
Hong Kong - Hang Seng Index: DOWN 1.1 percent at 15,256.83
Shanghai - Composite: DOWN 0.9 percent at 2,956.74
Euro/dollar: UP at $0.9989 from $0.9965 on Thursday
Pound/dollar: UP at $1.1582 from $1.1567
Euro/pound: UP at 86.25 pence from 86.11 pence
West Texas Intermediate: DOWN 0.8 percent at $88.41 per barrel
Brent North Sea crude: DOWN 0.6 percent at $96.36 per barrel
New York - Dow: UP 0.6 percent at 32,033.28 (close)
London - FTSE 100: UP 0.3 percent at 7,073.69 (close)
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