Asian Stocks Fall as Bank of Japan Delays Bond Buying Reduction
Asian stocks took a hit on Friday, with Chinese and Australian shares leading the decline, while the yen dropped as the Bank of Japan decided to delay a reduction in bond buying.
The MSCI Asia Pacific Index initially dropped by as much as 0.4% before paring losses, while the Japanese currency fell for the fifth time in six days. The Bank of Japan announced that it will specify a plan for bond purchases at the July meeting, pushing back reductions in buying until at least then.
Despite the initial decline, Japan’s Topix index managed to trade as much as 0.9% higher, showing resilience in the face of the news.
Yue Bamba, head of active investments at BlackRock Japan Co., expressed optimism about Japan’s equity market, stating, “Japan’s equity market is in pretty good shape and we expect monetary policy normalization to continue. That is a positive and stock markets will like that.”
However, Australian shares slid along with equity benchmarks in Hong Kong and China, putting the regional MSCI stock gauge on track for its third decline in the past four weeks. Mainland Chinese shares extended a drop into a fourth week, with calls growing for the nation’s central bank to ease policy to boost sentiment and support the economy.
US stock futures saw modest gains in Asia following the S&P 500 notching a fourth straight record, led by a surge in tech shares. Broadcom Inc. led a rally in US chipmakers, while GameStop Corp. and Adobe Inc. also saw gains in late trading.
Despite the positive sentiment in the US market, the breadth of the rally did not flow into Asia, with only a little more than a third of S&P 500 components advancing. Chris Weston, head of research at Pepperstone Group in Melbourne, noted that the weights of tech stocks on Asian equity markets are far lower.
In the bond market, Australian and New Zealand yields fell as Treasury yields held Thursday’s decline. The US producer price index unexpectedly declined the most in seven months, indicating that inflationary pressures are moderating.
Looking ahead, key events this week include speeches by Chicago Fed President Austan Goolsbee and US University of Michigan consumer sentiment data on Friday.
Overall, the Asian markets faced challenges as the Bank of Japan’s decision to delay bond buying reductions weighed on investor sentiment, while the US market saw a more mixed reaction to recent economic data and corporate earnings.
