(Times Of Update) — Asian stocks fell as traders pondered the sustainability of a technology rally that pushed a key benchmark to a near two-year high. The offshore yuan weakened to its lowest level this year.
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Japanese and Chinese stocks were behind the weakness in regional stocks. The MSCI Asia-Pacific index fell 0.4% after Wednesday’s 1% gain, when renewed optimism about artificial intelligence boosted most markets. Technology stocks in the region suffered, with the Hang Seng Technology Index falling more than 1%. S&P 500 futures rose slightly.
The People’s Bank of China set the yuan’s daily reference rate at its lowest level since November, a sign that policymakers are loosening their grip on the currency. The Japanese yen oscillated between gains and losses after a five-session decline, which saw it close above 158 against the dollar. The Times Of Update Dollar Strength Index was little changed.
Asian stocks are taking a breather and “need a dose of adrenaline after another night of records on Wall Street”, said Tony Sycamore, market analyst at IG Australia. More importantly, Japanese traders are likely “afraid of a new round of monetary interventions that will push down USD/JPY and with it the Nikkei.”
US and Australian Treasury bond yields rose slightly, following a rise in their European counterparts. There was no trading in Treasuries on Wednesday due to a U.S. holiday.
Chinese 10-year bond futures hit a record high. Bonds were the focus after PBOC Governor Pan Gongsheng gave the clearest indication yet that the central bank would start trading government bonds in the secondary market. Ten-year government bond futures closed at a record high on Wednesday.
Yields on New Zealand government bonds rose after the country’s economy emerged from a recession with a modest expansion in the first quarter. Gross domestic product rose 0.2% from the previous quarter, beating economists’ estimates of 0.1% growth.
“While the data may be volatile, markets view it as diminishing the chances of an early rate cut,” said David Croy, a strategist at Australia & New Zealand Banking Group in Wellington.
Despite Thursday’s tepid moves, MSCI’s index of Asian stocks is trading near its highest level since March 2022. Wall Street, meanwhile, has been buoyed by the continued AI frenzy and resilient economic growth that should continue to support corporate profits, particularly in the technology sector.
Questions are being asked about what could derail the stock market rally given that “all is not so rosy under the hood, where index market breadth has been weak, with disappointing participation, suggesting that the rally was built on shaky foundations,” said Chris Weston, head of research at the Pepperstone Group in Melbourne. “It’s just been difficult to bet against AI in its various forms. So until we lose these giants, index-level pullbacks are likely to be shallow and well-sustained.”
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