Most Asian stock markets retreated in cautious trade on Friday ahead of key U.S. payrolls data that is expected to factor into monetary policy, although a report that China plans to further scale back its strict anti-COVID measures helped limit losses.
Uncertainty over the path of U.S. inflation also weighed on Asian stocks on Friday, after data showed that the PCE inflation index- the Federal Reserve’s preferred inflation gauge- remained well above the central bank’s target range in October.
China’s bluechip Shanghai Shenzhen CSI 300 index fell 0.5%, while the Shanghai Composite fell 0.3%. Both indexes were set to rise 3.6% and 1.7% for the week respectively, amid growing speculation that China will lift its strict zero-COVID policy.
Reuters reported that the government is mulling such a move in the face of unprecedented country-wide protests against its lockdown measures, as well as sagging economic growth. A reopening would come as a great source of relief for Chinese markets and broader Asian markets that depend heavily on China.
Hong Kong’s Hang Seng index fell 0.7% on Friday, and was set to gain 2.6% this week.
Broader Asian stocks fell as the U.S. PCE inflation reading brewed more uncertainty over the path of monetary policy. While the Fed signaled that it will raise interest rates at a slower pace in the near term, it also warned that rates could peak at higher levels if inflation remains stubbornly high.
U.S. payrolls data due later today is also expected to factor into the Fed’s stance on policy, given that the bank has targeted some softening in the labor market to control inflation.
But the prospect of smaller U.S. rate hikes also benefited Asian markets this week, particularly those heavily exposed to technology.
South Korea’s KOSPI index was set to add 0.3% this week, while the Taiwan Weighted index was trading up 1.4% for the week.
India’s Nifty 50 and BSE Sensex 30 bourses retreated from record highs on Friday. But the two were set to close the week 1% higher on increasing optimism over the Indian economy.
Japanese stocks were a major outlier this week, with the Nikkei 225 index sinking 1.7% on Friday and losing nearly 2% this week.
A slew of weak economic readings this week ramped up concerns over a Japanese economic slowdown, as the country grapples with rising inflation and a weak yen.