Asian markets edged lower on Friday as concerns over economic growth and virus outbreaks weighed on sentiment and risk aversion set in following dovish comments from the Federal Reserve chief.
Fed Chair Jay Powell reiterated the central bank’s plan to maintain stimulus initiatives until the economy fully recovers while Treasury Secretary Janet Yellen warned that inflation would remain elevated for months to come.
“I think we will have several more months of rapid inflation, so I’m not saying that this is a one-month phenomenon,” Yellen said during an interview on CNBC after US markets closed.
However she predicted price increases would reach “normal levels” over the medium term.
Wall Street ended mixed, with the Dow closing marginally higher while the other two major indexes retreated.
“US stocks tumbled after a second day of Fed Chair Powell’s dovish testimony didn’t provide any fresh catalysts to buy risky assets,” said OANDA’s Edward Moya.
“Risk aversion is firmly in place, possibly because the earnings bar may have been set too high for the banks and because the reopening trade can’t get its groove back. It didn’t help having China’s economic growth reading overnight come in below expectations,” Moya added.
Asian markets were mostly lower, with Tokyo closing down one percent with investors cautious over expanding Covid-19 infections and as the Bank of Japan trimmed its GDP growth forecast for the current fiscal year.
“Investors are worried about a spike in infection cases in Tokyo ahead of the Olympics,” Shinichi Yamamoto, a broker at Okasan Securities, told AFP.
– Biden warning on Hong Kong –
Hong Kong ended flat as late profit-taking wiped out earlier gains ahead of an advisory from US President Joe Biden expected later Friday warning firms over doing business in the city as Beijing tightens its grip.
“The situation in Hong Kong is deteriorating. And the Chinese government is not keeping its commitment that it made how it would deal with Hong Kong,” Biden said Thursday at a press conference with visiting German Chancellor Angela Merkel, signalling no imminent improvement in Sino-US relations.
Shanghai closed 0.7 percent lower while Seoul, Taipei, Kuala Lumpur and Bangkok also retreated. Wellington was flat while Sydney, Singapore, and Jakarta ticked higher.
European stocks opened higher, with London up 0.5 percent as markets shrugged off Asian losses and virus concerns.
Investors were also awaiting US retail sales for June due later in the day for the latest indication on the state of the economic recovery.
“While the US is doing well on the vaccine rollout plans and the reopening of the economy, with theme and holiday parks also reopening, the rise in cases that we are now seeing appears to be feeding into an overriding feeling of caution around consumer spending patterns which appears to be tempering retail sales,” said Michael Hewson, chief market analyst at CMC Markets UK.
Both main oil contracts were trading marginally higher in Asian trade, with WTI down 3.9 percent over the week while Brent was 2.7 percent lower.
– Key figures around 0820 GMT –
Tokyo — Nikkei 225: DOWN 1.0 percent at 28,003.08 (close)
Hong Kong — Hang Seng Index: FLAT at 28,004.68 (close)
Shanghai — Composite: DOWN 0.7 percent at 3,539.30 (close)
New York — Dow: UP 0.2 percent at 34,987.02 (close)
London — FTSE 100: UP 0.4 percent at 7,041.96
Euro/dollar: DOWN at $1.1806 from $1.1813 at 2100 GMT Thursday
Pound/dollar: UP at $1.3846 from $1.3832
Euro/pound: DOWN at 85.27 from 85.41 pence
Dollar/yen: UP at 110.10 from 109.82 yen
Brent North Sea crude: UP 0.10 percent at $73.54 per barrel
West Texas Intermediate: UP 0.04 percent at $71.68 per barrel