Asian shares fell on Friday as the prospect of US interest rate hikes ended a rally, while Alibaba dragged down Hong Kong after saying it would cancel the planned spinoff of its cloud computing arm.
After an exciting few days on the trading floor, the week is headed for a slow end, with Wall Street falling, even as a forecast-defining surge in US jobless claims added to optimism that the central bank will again… Will not be strict.
The latest labor market data follows a weaker-than-expected print on consumer and producer price inflation, suggesting that more than a year of rate hikes are having the desired effect.
The reading sent markets into a tailspin and Treasury yields falling, with some traders even entertaining the idea of multiple cuts in borrowing costs next year.
“This unexpected increase may further reinforce the view that economic conditions may require, or at least suggest, a change in Federal Reserve policy,” said Stephen Innes at SPI Asset Management.
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“When used as a sober study of consumer and producer prices, this week’s claims update, at the very least, argues against additional Fed hikes.”
However, traders are adamant the Fed has left the door open to a possible hike if the data gets worse, warning the economy could be at risk of slipping into recession.
Those worried about a recession reported that unemployment benefits are at their highest level in two years, factory output is falling more than forecast and homebuilder sentiment is at its weakest in 2023.
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Sydney, Seoul, Singapore, Manila, Jakarta and Wellington were with losses in early trade. Tokyo was a little less.
Hong Kong was the biggest loser, as market-heavyweight Alibaba lost more than nine percent after a surprise decision not to shut down its cloud computing arm due to the US-China chip war.
In one of its most sweeping restructuring, Alibaba said in March it planned to split the giant conglomerate into six separate entities that would be able to raise funding separately through public listings.
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But on Thursday, it stopped building out its cloud intelligence arm in light of “the recent expansion of US restrictions on exports of advanced computing chips.”
Washington has cited national security grounds to block shipments of powerful chips to China, including those from California-based Nvidia, which are crucial to the development of artificial intelligence.
The spinoff “may not achieve the intended impact of shareholder value enhancement,” the firm said in an earnings release Thursday.
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It added, “Accordingly, we have decided not to proceed with a full spin-off, and instead we will focus on developing a sustainable growth model for Cloud Intelligence Group under liquid circumstances.”
The announcement took traders by surprise, and its US-listed shares fell more than nine percent, as it was one of the most high-profile victims of the China-US standoff.
It was the latest blow to the company, which has been under Beijing’s watchful eye in recent years and hit by a series of restrictions on the domestic tech sector.
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“I was quite surprised,” said Kevin Nett of Tocqueville Finance. “My initial view is that the entire corporate restructuring … may be in jeopardy.”
And Forsyth Barr Asia’s Willer Chen simply said: “The market is scratching its head.”
Crude oil prices rose but made little progress, falling more than five percent on Thursday on demand concerns, China’s economic problems and rising US stockpiles.
West Texas Intermediate fell into a bear market, falling more than 20 percent from its recent peak, with promises from Saudi Arabia and Russia to maintain production cuts unable to provide enough support.
Tokyo – Nikkei 225: flat (break) at 33,422.93
Hong Kong – Hang Seng Index: down 1.9 percent at 17,489.00
Shanghai – Composite: down 0.3 percent at 3,041.32
Dollar/yen: declined to 150.47 yen from 150.76 yen on Thursday
EUR/USD: up from $1.0851 to $1.0853
Pound/Dollar: Down from $1.2411 to $1.2409
Euro/pound: up from 87.41 pence to 87.45 pence
West Texas Intermediate: up 0.3 percent at $73.09 a barrel
Brent North Sea crude: up 0.3 percent at $ 77.61 per barrel
New York – Dow: down 0.1 percent at 34,945.47 (close)
London – FTSE 100: down 1.0 percent at 7,410.97 (close)
— Bloomberg News contributed to this story —
Source: www.barrons.com
