Asian shares have nudged lower, weighed down by China and Hong Kong stocks due to concerns over the stuttering recovery in the world’s second-biggest economy, although Japan’s Nikkei clocked an almost 33-year peak.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.20 per cent on Friday but was set to eke out a gain of 0.19 per cent for the week.
China shares fell 0.61 per cent, while Hong Kong’s Hang Seng index dropped as much as 1.8 per cent, dragged down by tech stocks after Alibaba Group Holding Ltd reported a lower-than-expected 2.0 per cent rise in quarterly revenue.
Data in the week underscored that China’s economy lost momentum at the beginning of the second quarter, stoking worries over the wobbly post-COVID-19 recovery.
Japan’s Nikkei continued its ascent, rising to its highest since August 1990, during the country’s so-called bubble era.
Investor attention has been firmly on the negotiations over the US debt ceiling and increasing hopes that a deal could be reached sent US shares higher overnight.
E-mini futures for the S&P 500 rose 0.16 per cent.
US President Joe Biden and House of Representatives Speaker Kevin McCarthy, the top Republican in Washington, hope to finalise a deal on the debt ceiling after Biden returns from the Group of Seven meeting in Japan on Sunday.
“What makes things more complicated this year is that the Democrats and Republicans are so wide apart from each other … negotiations will take a long time because each one is trying to get something out of that negotiations,” said Alexandre Tavazzi, head of CIO office and macro research for Pictet Wealth Management.
Meanwhile, data overnight showed fewer-than-expected Americans filed initial jobless claims last week, lowering the odds the Federal Reserve will cut interest rates before year-end.
Hawkish rhetoric from Fed speakers continued with Dallas Fed President Lorie Logan and St Louis Fed President James Bullard saying inflation was not cooling fast enough to allow the Fed to pause its interest-rate hike campaign.
Markets are now pricing in a 36 per cent chance of a 25 basis point hike when the Fed meets next month, compared with a 10 per cent chance a week earlier, CME FedWatch tool showed.
Focus will now switch to Fed Chair Jerome Powell’s panel discussion later in the global day.
ActivTrades market analyst Anderson Alves said the hawkish narrative starkly contrasts with the message from May’s Fed meeting, which signalled a high bar for future hikes, a sentiment that Powell seemingly did not discourage during the last news conference.
In the currency market, the yen strengthened 0.14 per cent to 138.51 per US dollar but was near the six-month low of 138.75 it touched overnight.
Against a basket of currencies, the dollar rose 0.077 per cent and was wedged near a two-month high.
The euro was down 0.07 per cent to $US1.0761 ($A1.6280), while sterling was last trading at $US1.2391 ($A1.8746), down 0.14 per cent on the day.
The offshore yuan fell to 7.0677 per dollar, the weakest since December 2.
Analysts predict more weakness in the future and point to the Fed’s policy as being the bigger driver than economic weakness at home.
US crude fell 0.14 per cent to $US71.76 ($A108.56) per barrel and Brent was at $US75.78 ($A114.65), down 0.11 per cent on the day.
Spot gold eased 0.1 per cent to $US1,956.18 ($A2,959.44) an ounce.