Asia report: Most markets slip after US inflation reading

Most Asia-Pacific markets saw declines on Wednesday, following a downturn on Wall Street overnight, spurred by hotter-than-expected US inflation data.

Patrick Munnelly, market analyst at TickMill, said most Asian equity indices were trading in negative territory, reflecting the downturn seen in the US overnight.

“The significant change in Federal Reserve expectations, first triggered by a strong US jobs report and then reinforced by Tuesday's unexpected increase in inflation, has led to a decrease in market expectations for 2024 interest rate cuts from approximately 160 basis points at the end of last year to just under 90 basis points currently,” he said.

“This shift has had a ripple effect globally, with traders now anticipating only one interest rate cut from the Reserve Bank of Australia this year, compared to the previous expectation of two cuts.

“Furthermore, the anticipation of higher US interest rates for a longer period is expected to constrain the potential for central banks in emerging markets to implement easing measures, especially those that had previously raised rates in an attempt to stabilise their currencies against a strengthening dollar.”

Most markets in the red, Hong Kong the exception

In Japan, the Nikkei 225 dropped by 0.69% to 37,703.32, while the Topix fell by 1.05% to 2,584.59.

Leading the decliners on Tokyo’s benchmark was Yamaha, down 5.83%, followed by DOWA Holdings with a 5.75% fall, and Pacific Metals, which lost 4.98%.

China's markets remained closed for the extended Lunar New Year holiday.

Hong Kong's Hang Seng Index showed resilience with a 0.84% increase to 15,879.38, led higher by Meituan, up 5.65%; Country Garden Services, ahead 5.47%; and Hansoh Pharmaceutical Group, which gained 5.41%.

South Korea's Kospi index faced a decline of 1.1% to 2,620.42, with significant drops seen in Hanjinkal, Samsung Fire & Marine Insurance, and EcoPro Materials, which were down 8.07%, 7.73% and 4.3%, respectively.

Korean Air descended 2.26% despite the European Commission's approval of its merger with Asiana Airlines.

The approval was conditional on Asiana selling its cargo freighter business and divesting four overlapping passenger routes between Korea and the European Union.

Korean Air said it was now focussed on finalising discussions with US competition authorities to complete the merger review process.

In Australia, the S&P/ASX 200 declined 0.74% to 7,547.70, with notable decreases of 12.3% in Graincorp, while Fletcher Building lost 8.65% and BSP Financial Group slid 8.25%.

Similarly, New Zealand's S&P/NZX 50 fell 0.67% to 11,661.32, with Fletcher Building tumbling 13.22%, followed by Investore Property with a drop of 3.42%, and Pacific Edge registering declines of 3.33%.

In currency markets, the dollar was last down 0.09% on the yen to trade at JPY 150.66, while the greenback decreased 0.32% and 0.24% against the Aussie and the Kiwi, respectively, reaching AUD 1.5446 and NZD 1.6460.

Oil prices saw marginal gains, with Brent crude futures last up 0.22% on ICE at $82.95 per barrel, while the NYMEX quote for West Texas Intermediate climbed 0.17% to $78.00.

Japanese bond yields rise as yen weakens

In economic news, 10-year Japanese government bond yields rose to 0.766 on Wednesday, marking their highest level since 11 December.

The increase coincided with the yen's seventh consecutive session of weakening, slipping below the 150 mark against the dollar.

Under the Bank of Japan’s yield curve control policy, the central bank maintained a target of around 0% for 10-year bond yields, with an upper limit set at 1% as a reference.

Reporting by Josh White for Sharecast.com.