Taipei and Jakarta gained, but Tokyo, Sydney, Seoul, Singapore, Manila and Wellington dropped
Asian markets diverged Friday as hopes for US interest rate cuts played up against profit-taking from another strong week and warnings from Fed officials that borrowing costs should be kept higher for now.
All three main indexes in New York as well as London, Paris and Frankfurt turned lower Thursday, having closed at record peaks the day earlier.
The losses came as investors digested data showing US inflation had dropped in April after coming in above forecasts the previous three months.
The figure boosted hopes the Federal Reserve could lower rates as soon as July, but warnings about the outlook for prices tempered that optimism and saw traders pare their forecasts to one cut in 2024, from two tipped on Wednesday.
Three top officials at the Fed pushed back against talk of an early cut, adding that they wanted to see more evidence that inflation was under control.
Cleveland Fed boss Loretta Mester said that “incoming economic information indicates that it will take longer to gain that confidence”.
Holding our restrictive stance for longer is prudent at this point as we gain clarity about the path of inflation, she said.
She was joined by New York counterpart John Williams, who said he saw no reason to reduce just now, while Richmond boss Thomas Barkin said it would take time to get inflation back to the bank’s 2% goal.
Their remarks were echoed by JPMorgan Chase chief Jamie Dimon, who said he was still concerned about price rises and that there was still plenty of upward pressure that meant borrowing costs might have to be kept higher.
There are a lot of inflationary forces in front of us, he told Bloomberg Television. The underlying inflation may not go away the way people expect it to.
Asian markets continued to gain, with Hong Kong boosted by a rally in tech firms following strong earnings reports from Baidu and JD.com.
Market heavyweight HSBC weighed on the Hang Seng Index, declining more than 2% on a report that major shareholder Ping An Insurance was considering lowering its stake in the banking giant.
A much-slower-than-expected increase in Chinese retail sales, meanwhile, revived concerns about the world’s second largest economy. That was partially offset by a forecast-topping figure on industrial output.
Shanghai also gained, with investors keeping an eye on a planned meeting between leaders and housing ministry officials to discuss the country’s beleaguered property sector, which has dragged the economy for years.
Taipei and Jakarta also advanced.
But Tokyo, Sydney, Seoul, Singapore, Manila and Wellington dropped.
