SINGAPORE- Asian stocks struggled on Thursday, dragged by selling in Hong Kong tech shares, while the dollar was under pressure and short-dated bonds were firm as softening US inflation seemed to suggest the US rate hike cycle was nearing its end.
Early in the Asia day the euro hit a 2-1/2 month top at $1.10. Investors reckon Europe’s central bankers will need to stay on the hawkish side for longer than their US counterparts to rein in rising prices.
MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.3 percent, largely pressured by a 1.5 percent drop in Hong Kong tech stocks in the wake of the Financial Times reporting SoftBank was selling down its Alibaba stake.
Alibaba shares were down 3 percent in early trade and SoftBank shares flat and neither immediately responded to Reuters enquiries.
Overnight data showed US consumer prices barely rose in March. The annual 5 percent headline rise was the smallest since May 2021 and down from 9.1 percent last June. Core CPI, which strips out energy and food prices, remained sticky at an annual 5.6 percent.
Minutes from the Federal Reserve’s March meeting also showed some policymakers considered pausing hikes, before agreeing to last month’s 25 basis point rise, with concerns centering on whether bank wobbles would cause a broader tightening in credit.
“Some hit is expected, with banks tightening their lending standards,” said currency analyst Moh Siong Sim at the Bank of Singapore.
“But the jury is still out on whether it still has a meaningful impact on US growth. That part of the equation is still being worked out. It could slow down further dollar weakness.”
Two-year Treasury yields dropped more than 8 bps and were then steady in Asia trade at 3.9662 percent. Fed funds futures imply about a 70 percent chance that there’s one more rate hike coming in May, followed by cuts nearer the end of the year.
