Equities in Australia and South Korea fell along with Hong Kong stock futures, echoing Thursday’s sell-off in U.S. stocks, where both the S&P 500 and the tech-heavy Nasdaq 100 fell.
The yen strengthened on Friday morning as Japanese inflation data beat expectations. Consumer prices rose 2.8% in July from a year earlier, the same as the previous month and more than the 2.7% expected by economists.
Investors are bracing for possible surprises when Governor Kazuo Ueda speaks to Japanese lawmakers on Friday after aggressive rhetoric helped trigger a sell-off in world stock markets Earlier this month.
The 10-year Treasury yield was flat in Asian trading after rising five basis points on Thursday, while the policy-sensitive two-year yield rose seven basis points, largely reversing the previous session’s move. The dollar strength index was broadly unchanged after a gain on Thursday. Australian and New Zealand bond yields rose early Friday. “Now, once again, we’re not debating whether they will cut, but how much they will cut and how many times they will cut before the end of the year,” said Kenny Polcari of SlateStone Wealth. “The U.S. economy is not in crisis, so there’s no need to suggest it is.”
Investors sifted through a range of comments from U.S. policymakers. Kansas City Federal Reserve Bank President Jeffrey Schmid said he wants to see more data before backing cuts. His Boston counterpart Susan Collins said a “gradual and methodical pace” was probably appropriate. Her comments were echoed by Philadelphia Federal Reserve President Patrick Harker in an interview with CNBC.
“The script is clear: the Fed is going to ease monetary policy in September, but no one is showing a desire to ease 50 basis points at this point,” said Andrew Brenner of NatAlliance Securities.
On the economic front, the latest numbers were rather mixed. Jobless claims data showed the labor market is cooling only gradually, rather than slowing rapidly amid elevated rates. U.S. manufacturing activity contracted at the fastest pace this year. And existing home sales rose for the first time in five months.
Declines in U.S. stocks on Thursday included a 3.7% drop for Nvidia Corp., which led losses in Big Tech. Intel Corp. fell 6.1%, while banks rose and energy stocks joined oil in gains. Peloton Interactive Inc. rose 35% after the fitness company reported earnings that beat estimates.
In commodities, West Texas Intermediate held steady after a 1.5% gain on Thursday and gold advanced after a fall on Thursday.
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