Asian Stocks Fall as Yen in Range After Japan CPI: Markets Wrap

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(Bloomberg) — Asian stocks dropped after US shares and Treasuries extended this month’s selloff following solid economic readings and hawkish Federal Reserve commentary.

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Equities in Australia, Japan and South Korea all fell, as did equity futures in Hong Kong. Contracts for US shares were lower after the S&P 500 slipped for a fifth day Thursday, with its most influential group — technology — leading declines.

Treasuries were little changed in Asia after declining across the US curve Thursday with two-year yields once again near the 5% mark. Australian bonds slipped in early trading, following the move in Treasuries. An initial quarter-point Federal Reserve interest-rate cut remained priced in for November.

The yen was little changed by Japanese inflation data that came in below economists’ estimates. The 2.7% monthly reading for March was just below the 2.8% consensus forecast. An increasing number of economists expect the BOJ to raise rates again in October after it stands pat next week, with most of them flagging an earlier move in July as a risk scenario, according to a Bloomberg survey.

The dollar traded in a narrow range against its major peers in early Friday trade after advancing Thursday.

Global markets have been ravaged as traders slashed bets on Fed easing this year following a series of hawkish comments from officials and data that indicates a robust US economy. An index of global bonds is down 2.3% so far in April, a decline that — should it hold — would mark the worst month since September. The MSCI All Country World Index has dropped 2.1%, on track for its biggest weekly decline since October.

US-listed shares of Taiwan Semiconductor Manufacturing Co. dropped 4.9% after the company revised down the revenue growth outlook for the semiconductor industry, citing a softer recovery across smartphone and personal computer sectors. Infosys Ltd. slumped in the US after forecasting tepid sales growth for the year.

New York Fed President John Williams said while it’s “not” his baseline expectation to hike interest rates, it’s possible — if warranted. His Atlanta counterpart Raphael Bostic said he doesn’t think it will be appropriate to ease until toward the end of 2024. The Fed may “potentially” hold rates steady all year, Minneapolis Fed chief Neel Kashkari told Fox News Channel.

In economic data, US jobless claims remained subdued, consistent with a healthy job market. Separately, the Philadelphia Fed factory index topped estimates. While existing-home sales fell, the pace was roughly in line with the median forecast of economists.

The market’s biggest worry right now is inflation, which is re-accelerating and throwing cold water on the idea of any rate cuts in 2024, according to Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management.

“We are firmly in the camp of no rate cuts in 2024,” he said. “We believe investors should prepare for a higher-for-longer regime when it comes to both inflation and interest rates and that investment portfolios should be positioned for these dynamics for the foreseeable future.”

Most emerging market currencies fell on Thursday, with the Mexican peso among the laggards as rising volatility derails carry trade positions that has propelled the currency higher for the past few months. Indonesia’s rupiah will be closely watched when trading resumes after the government asked state-owned firms to refrain from big dollar purchases in expectation the currency will weaken further.

Elsewhere, oil was little changed while gold held an advance amid growing political risks and demand from central banks and Chinese consumers.

Israel received its first-ever sovereign downgrade as S&P Global Ratings lowered its credit rating to A+ from AA- on heightened geopolitical risks for the region.

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