Asia report: Regional markets finish week in the red

Asia-Pacific markets experienced significant declines on Friday, following a steep sell-off on Wall Street fueled by concerns over interest rates and the release of inflation data from Japan.

Patrick Munnelly, market analyst at TickMill, said the decline in Asian markets and currencies came after a fall on Wall Street, which itself was prompted by data suggesting that the Federal Reserve might not change interest rates for most of the year.

“The MSCI's Asia Pacific Index was set for its worst day since May 8 and its first drop in five weeks, with significant decreases in shares in Hong Kong, mainland China and Japan,” Munnelly noted.

“Chinese stocks in Hong Kong were also heading for their worst weekly performance since January.

“Despite this, US futures showed a slight increase after the S&P 500 experienced its biggest drop this month on Thursday.”

Patrick Munnelly said market swaps now fully anticipated that the Fed's first quarter-point rate cut would occur in December, as opposed to the November they had pencilled in just a day earlier.

“While service provider activity saw its quickest increase in a year, industrial output also rose at a faster pace.

“This resilience makes it more challenging for inflation to decrease, leading to the likelihood of the Fed maintaining higher interest rates for a longer period.”

Stock markets a sea of red across the Asia-Pacific region

In Japan, the Nikkei 225 dropped 1.17% to 38,646.11, and the broader Topix declined 0.44% to 2,742.54.

Major decliners on Tokyo’s benchmark included Fuji Electric, which plunged 11.19%, Lasertec, down 4.49%, and Advantest, which fell 4.48%.

Chinese markets also faced losses, with the Shanghai Composite decreasing by 0.88% to 3,088.87 and the Shenzhen Component dropping 1.23% to 9,424.58.

Guangzhou Fangbang Electronics tumbled 13.2% to lead the losers in Shanghai, while Beijing Urban Construction Investment & Development fell 10.07%.

Hong Kong’s Hang Seng Index led regional losses, falling 1.38% to 18,608.94.

Key laggards in the special administrative region included Zhongsheng Group Holdings, down 8.94%, Country Garden Services, which lost 8.25%, and Li Ning Co, which decreased by 6.17%.

South Korea’s Kospi dropped 1.26% to 2,687.60, with Hanjinkal down 8.36% and Hanwha Solutions declining 6.2%.

Australia’s S&P/ASX 200 fell 1.08% to 7,727.60, impacted by a 6.1% drop in Fletcher Building and a 4.49% decline in Emerald Resources.

New Zealand's S&P/NZX 50 saw a relatively smaller decline of 0.22%, closing at 11,783.39.

Synlait Milk dropped 6.25% in Wellington, while Fletcher Building fell 5.96% in its home country.

In currency markets, the dollar was last 0.03% stronger on the yen to trade at JPY 156.97, while it weakened 0.18% against the Aussie to AUD 1.5110, and retreated 0.2% from the Kiwi to change hands at NZD 1.6362.

Oil prices also fell, with Brent crude futures last down 0.74% on ICE at $80.76 per barrel, and the NYMEX quote for West Texas Intermediate decreasing 0.81% to $76.25.

Inflation slows in Japan for the second month in a row

In economic news, Japan's inflation rate eased to 2.5% in April, down from 2.7% in March, marking the second consecutive month of deceleration.

Core inflation, which excludes fresh food prices, also declined, reaching 2.2% from 2.6%, aligning with market expectations.

The so-called ‘core-core’ inflation rate, which excludes both fresh food and energy prices and is closely monitored by the Bank of Japan for monetary policy decisions, saw the most significant drop, falling to 2.4% in April from 2.9% in March.

Reporting by Josh White for Sharecast.com.