By Gina Lee
Investing.com – Asia Pacific stocks were mostly up Thursday morning as investors digested a slowdown in the Chinese service sector’s expansion alongside comments from the U.S. Federal Reserve.
China’s Shanghai Composite inched down 0.02% by 10:38 PM ET (2:38 AM GMT) and the Shenzhen Component was down 0.31%.
Data released earlier in the day said May's Caixin Services Purchasing Managers Index (PMI) was 55.1, lower than April’s 56.3 and the non-manufacturing PMI’s 55.2 reading released by the National Bureau of Statistics on Monday.
U.S-China tensions were also on investors’ radars as U.S. President Joe Biden will reportedly sign an amended order later this week that bans U.S. investment in a list of companies for their connection to China’s defense and surveillance technology sectors.
Japan’s Nikkei 225 was up 0.35% after data released earlier in the day said the services PMI in May was 46.5, below April’s 49.5.
Hong Kong’s Hang Seng Index edged up 0.11% and South Korea’s KOSPI rose 0.80%.
In Australia, the ASX 200 was up 0.45%. The country’s retail sales grew 1.1% month-on-month in April according to data released earlier in the day.
In the U.S., Philadelphia Fed President Patrick Harker said on Wednesday that the Fed should start discussing the timeline for tapering its bond purchases.
“I think it is appropriate for us to slowly, carefully move back on our purchases at the appropriate time… when that is, that is something we need to start discussing,” he said.
Investors remain concerned about a mix of issues including prospective runaway inflation and a gradual scale back of stimulus measures. However, some Fed officials have reiterated the price pressure will be temporary and that policymakers will continue to support businesses’ reopening from the COVID-19. BlackRock Inc (NYSE:BLK). Chief Executive Officer Larry Fink said a prospective outbreak of inflation may be underestimated.
The central bank also indicated in its periodic Beige Book that businesses are facing a labor shortage and rising costs when U.S. economic growth increased at a “moderate pace” from early April to late May.
Meanwhile, the Fed said on Wednesday that it plans to slowly sell a portfolio of corporate debt purchased through an emergency lending facility that it launched in 2020 when COVID-19 hit financial markets.
“Portfolio sales will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions for exchange-traded funds and corporate bonds,” the Fed said.
“It seems like they’re starting to lay the groundwork for tapering… so I think investors are just in a holding pattern right now,” Aaron Clark, portfolio manager at GW&K Investment Management, told Bloomberg.
On the data front, investors now await U.S. non-farm payrolls data for May to further gauge the economic recovery from COVID-19 and inflation risks.