Wednesday 03:50 BST. Japanese equities were lower in a mixed session for Asian markets, after Wall Street pulled back from record highs and as investors continued to reassess the outlook for policy action from global central banks.
Japan’s broad Topix was down 0.6 per cent and the Nikkei 225 was off 0.7 per cent as the yen firmed 0.2 per cent to ¥105.95 per US dollar.
In Australia the S&P/ASX 200 added 0.6 per cent, while Hong Kong’s Hang Seng rose 0.7 per cent. On the mainland, China’s Shanghai Composite was off 0.2 per cent but the smaller Shenzhen Composite gained 0.1 per cent.
Overnight, the S&P 500 eased 0.1 per cent from a record high, although the Dow Jones Industrial Average managed to scale a new peak. The Nasdaq Composite retreated 0.4 per cent.
That followed better-than-expected data on US jobs growth, retail sales, industrial production and housing starts, which backed the case for raising US interest rates.
The dollar index, a measure of the US currency against a basket of global peers, was up 0.1 per cent at 97.134, its highest since March. The dollar has received a mild boost as investors reassess the likelihood of US interest rate rises now that markets have calmed in the wake of last month’s Brexit vote in the UK.
“Recent comments by Fed officials suggest that the door is not closed on US rate hikes as the markets would like to believe. Some Fed watchers are starting to put September back on the radar for the Fed’s second hike since December 2015,” said analysts at DBS.
With equities broadly in retreat on Tuesday, havens such as government bonds and gold rallied. Still, on Wednesday, yields (which move inversely to price) on 10-year US Treasuries and Japanese government bonds were lower. Gold was flat at $ 1,332.01 an ounce in Asia after rising a quarter of a per cent the previous session.
Analysts at Jefferies, noting a “heightened correlation” between equities and bond yields in light of a benign view about inflation, said: “Investors should keep a careful watch over flows into high yields bonds and how bond investors react to treasury auctions at such low yields”.
Investors are also preparing for a handful of central bank meetings over the next fortnight, starting on Thursday with the European Central Bank, followed by the Fed and Bank of Japan next week.
On Tuesday the IMF cut its forecasts for growth in the UK and Europe. It noted in its World Economic Outlook Update that “the Brexit vote implies a substantial increase in economic, political, and institutional uncertainty, which is projected to have negative macroeconomic consequences”.
The euro was down 0.2 per cent at $ 1.1002 on Wednesday in Asia, its lowest point since March. The UK pound was down 0.3 per cent at $ 1.3073, after sinking 1.1 per cent on Tuesday.
Oil prices were mixed, with Brent crude, the international benchmark, up 0.1 per cent at $ 46.72 a barrel and West Texas Intermediate down 0.1 per cent at $ 44.60.
Among stock moves, Nintendo was the worst performer on Japan’s Topix, dropping as much as 14.7 per cent. Its shares have more than doubled in the fortnight since the launch of its popular Pokémon Go mobile game, but were under pressure amid reports its debut in Japan, reportedly slated for Wednesday, could now come on Thursday instead.
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