Nikkei 225 Extends Weekly Losses, Hong Kong Stocks Trade Volatile After U.S. Rate-cut Enthusiasm Wanes

Akira Ito
05 Apr, 2024
Tokyo

Market indexes in Tokyo dropped 2%, and in Hong Kong, Seoul, and Sydney declined around 1%. 

The latest decline in indexes was sparked by a growing realization that U.S. policymakers are not in a hurry lower rates after a string of positive economic data. 

Those comments are in sharp contrast to the expectations of as many as three rate cuts just two months ago. 

“If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all,” said Kashkari, president of the Minneapolis Federal Reserve Bank, in an interview with Pensions & Investments on Thursday. 

Last month, Kashkari projected two rate cuts in 2024 but turned cautious following the recent economic data. 

The latest update on manufactured goods orders, construction spending, the personal consumption expenditures price index, and job openings suggested resilient economic and labor market conditions. 

The comments of U.S. policymakers over the last two days suggested that policymakers are more  likely to hold interest rates higher for longer. 

 

Japan Indexes Extend Weekly Losses, Yen Rally Falters 

Stocks in Japan traded down, and the benchmark indexes extended weekly losses to more than 2%, after investors lowered rate-cut expectations in the U.S. 

The yen traded above 151 against the U.S. dollar on the worry that the rate differential with the U.S. rates may remain high longer than previously anticipated. 

Moreover, investors worry that the Bank of Japan's rate hike last month may not be enough to stabilize the yen. 

The Japanese yen has been hovering near 152 level against the yen, prompting verbal intervention by the ministry of finance. 

The Japanese corporations are still not likely to increase profit repatriation because of the persistent and large interest rate gap between the rates in Japan, the U.S., and the Euro Area. 

The average household spending in Japan was down 0.5% from a year ago to 279,868 yen, or $1,866, in February, the Ministry of Internal Affairs and Communications said on Friday.

The decline in February follows the 6.3% slide in January.

The Nikkei 225 Stock Average decreased 2% to 38,955.19, and the Topix index dropped 1.3% to 2,698.30. 

The Nikkei 225 index declined below 39,000 for the first time in three weeks. 

Crude oil prices approached a five-month high after conflict in the Middle East escalated following a deadly bombing raid by Israel on Monday. 

Israel bombed Iran's embassy in Syria, killing three senior commanders among seven military advisors. 

Dubai crude oil for June delivery rose $1.05 to $90.85 a barrel after Israel stepped up its bombing campaign this week, raising speculation of a wider war in the Middle East. 

Tokyo Electric Power declined 6.5% to ¥946.60, and Inpex Corp. declined 0.2% to ¥2,466.0. 

Tech stocks were among the leading decliners in Tokyo. 

Tokyo Electron, Screen Holdings, Advantest, and SoftBank dropped between 2.5% and 4%. 

Sumitomo Mitsui Financial, Mizuho Financial, and Mitsubishi UFJ decreased around 2%, after investors lowered rate-cut expectations in the U.S. 

 

Hong Stocks Extend Weekly Losses 

The market index in Hong Kong reversed earlier gains in the day and closed down amid rate worries. 

Financial markets in China are closed for a public holiday on Friday.  

The Hang Seng Index declined 0.7% to 16,606.26 after investors pared back rate-cut expectations, and the index advanced 0.4% in a holiday-shortened week following the rise of 0.3% in the previous week. 

Despite the market intervention by Chinese government-controlled funds in financial markets, the Hang Seng index is the worst-performing market among the top 10 leading world markets. 

The Hang Seng index extended this year's decline to 1%, and extended five-year losses to 44%. 

Alibaba Group, Tencent Holdings, JD.com, Trip.com, Baidu.com, and Meituan declined between 0.2% and 2.2%. 

Xiaomi declined 2.2% to HK$15.14 after the initial enthusiasm faded following the launch of a new electric vehicle in a crowded passenger car market. 

 

India Stocks Trim Weekly Gains Ahead of the RBI's Rate Decisions 

Stocks in Mumbai lacked direction ahead of the rate decision later in the day. 

The Sensex and the Nifty indexes struggled to stay above the flatline as investors looked ahead to the monetary policy decision and inflation and economic growth projections from the Reserve Bank of India. 

Market sentiment was cautious in early trading after benchmark indexes on Wall Street declined more than 1%. 

The Sensex index decreased 0.03% to 73,876.83, and the Nifty index edged down 0.08% to 22,434.65. 

For the week to Thursday's close, the Sensex gained 0.9% and the Nifty index advanced 1.3%. 

On the Mumbai stock exchange, 214 stocks traded at their 52-week highs, and 7 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds held steady at 7.09%, and the Indian rupee held steady at ₹83.46 against the U.S. dollar.