HONG KONG: Japanese stocks retreated Thursday on the back of a stronger yen as traders consider the prospect of low US interest rates until the end of the year, while easing Chinese producer inflation offered hope for the world’s number two economy.
Another rise in US equities, which put the S&P 500 within spitting distance of a record high, was not enough to spur regional traders as profit-taking took hold following recent gains.
However, analysts said the likelihood of an extended period of monetary easing by central banks should provide support to stocks for some time.
“Expectations for a rate hike in the US have been pushed back… That should be supportive of equities,” James Woods, a Sydney-based analyst at Rivkin Securities, told Bloomberg News. “However, a delay in the (Federal Reserve) rate hike is strengthening the yen, providing a headwind for Japan.”
The dollar fell to 106.67 yen Thursday from 106.99 yen in New York, which sent the Nikkei falling 0.9 percent by the break.
The chances of a Fed rate hike in the summer were crushed on Friday by data showing the US economy added a quarter of the jobs expected in May. The central bank meets next week but dealers do not forecast a rise until September at the earliest.
South Korea’s won managed to edge up 0.10 against the greenback despite a surprise cut in the country’s interest rate to a record low, while the New Zealand dollar rallied 1.7 percent after its central bank decided against any further reductions.
Seoul stocks rose 0.3 percent and Wellington was up 0.1 percent. Hong Kong, Shanghai and Taipei were closed for public holidays.
In China, consumer inflation came in at two percent for last month, slightly below expectations and slower than April’s rate.
However, the fall in the producer price index — which measures what is paid at factory gates and a pointer to future consumer inflation — eased again, fueling hopes of a slowdown in the world’s number two economy is bottoming.
While the figures indicate an improvement, they are still weak enough to give authorities leeway in easing monetary policy further.
The news also comes a day after data showed imports fell at their slowest rate in 19 months in May in a possible sign domestic demand is gradually picking up.
The softer dollar provided further support to oil prices, which have almost doubled since hitting near 13-year lows in early 2016. In early trade West Texas Intermediate was up 0.7 percent at $51.61 and Brent gained 0.5 percent to $52.76.
Key figures around 0230 GMT
Tokyo – Nikkei 225: DOWN 0.9 percent at 16,677.84 (break)
Shanghai – Composite: Closed for a holiday
Hong Kong – Hang Seng: Closed for a holiday
Euro/dollar: UP at $1.1393 from $1.1393 late Wednesday
Dollar/yen: DOWN at 106.67 yen from 106.99 yen
Pound/dollar: DOWN at $1.4507 from $1.4503
New York – Dow: UP 0.4 percent at 18,005.05 (close)
London – FTSE 100: UP 0.3 at 6,301.52 (close)