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Global market update: APAC shares retreat amid weak US data, yields fall

Published 02/08/2024, 10:35 am
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Investing.com - APAC shares broadly declined on Friday, mirroring a sharp drop in US stocks overnight as cooling economic indicators and mixed earnings results weighed on sentiment.

The S&P/ASX 200 KOSPI 200, and Nikkei 225 each fell by 1.8%, 2.8% and 4.2%, respectively.

In the US, weaker employment, manufacturing, and construction data pushed the 10-year Treasury yield below 4% for the first time since February, triggering a selloff in stocks and other risk-sensitive assets.

Major indices reversed their early gains after a key manufacturing activity gauge fell deeper into contraction and construction spending declined for the second straight month in June, contrary to economists' expectations of a recovery towards April's record levels.

The Dow Jones Industrial Average dropped nearly 500 points. The NASDAQ Composite ended the day 2.3% lower, erasing most of Wednesday's 2.6% gain. The S&P 500 had its largest intraday swing since November 2022 and closed 1.4% down.

Significant declines in shares of Moderna Inc (NASDAQ:MRNA), MGM Resorts International (NYSE:MGM), and several tech stocks offset gains in utility shares.

Boeing Co (NYSE:BA) shed 6.4%, along with more than 4% losses for Intel Corporation (NASDAQ:INTC), Chevron Corp (NYSE:CVX), and Caterpillar Inc (NYSE:CAT).

The Russell 2000, which tracks smaller companies, tumbled 3% as investors moved away from riskier assets.

Investors flocked to the safety of bonds. The yield on the United States 10-Year fell to 3.977%, down from 4.107% on Wednesday.

The 2-year Treasury yield, closely tied to short-term rate expectations set by the Federal Reserve, fell more than a quarter percentage point over the past five sessions, closing at 4.163%.

Thursday's drop marked the largest one-day yield decline for both the 2-year and 10-year Treasurys since December 13.

Investors had already begun buying bonds in anticipation of the Federal Reserve potentially cutting interest rates soon. Bonds rallied on Wednesday after Fed Chairman Jerome Powell signaled that the central bank might reduce borrowing costs at its September meeting. The Fed maintained steady rates during its recent meeting.

The Bank of England cut rates on Friday for the first time in over four years, leaving the Fed among a shrinking number of central banks yet to reduce borrowing costs.

The British pound fell against the US dollar and the euro. London's FTSE 100 stock index rose by 1%.

In the stock market, quarterly results and corporate sales forecasts continued to significantly affect individual shares.

Meta Platforms shares climbed 4.8% after Facebook (NASDAQ:META)'s parent company reported an increase in digital ad sales.

Moderna's stock sank 21% after the company lowered its sales outlook due to weak demand for COVID-19 vaccines.

MGM Resorts experienced a 13% drop, its worst day since the COVID-19 lockdowns in March 2020, after reporting disappointing earnings. Goodyear Tire & Rubber missed second-quarter sales expectations and fell 16%.

In commodities, Brent crude oil dropped 1.6% to $79.52 per barrel, while gold fell 0.1% to $2,444.39.

Chinese shares closed lower, with the Shanghai Composite Index down 0.2% to 2,932.39. The Shenzhen Composite Index fell 0.5%, and the ChiNext Price Index dropped 1.3%. China's finance ministry reiterated messages from the July Politburo meeting, without detailing further stimulus measures. Consumer stocks led the decline, with Proya Cosmetics falling 4.65% and Yunnan Botanee Biotechnology down 2%. Gainers included China Yangtze Power, up 0.9%, and SAIC Motor, rising 0.3%.

Hong Kong’s Hang Seng Index closed 0.2% lower at 17,304.96, weighed down by consumer stocks. The market likely reacted to China's Caixin PMI data, which showed factory activity contracting in July for the first time in nine months. Major decliners included Zhongsheng Group (-6.55%), Li Ning (-4.5%), and Haidilao (-3.9%). On the upside, Power Assets Holdings gained 5%, Link REIT rose 3.3%, and CLP Holdings climbed 3.1%. The Hang Seng Tech Index fell 1.15% to 3,476.58.

Japanese stocks declined, dragged down by real estate and auto stocks as the yen strengthened following the Bank of Japan's rate increase on Wednesday. Mitsui Fudosan fell 8.1%, and Mitsubishi Estate dropped 9%. Toyota Motor lost 8.5% despite a 1.7% increase in 1Q net profit, partly thanks to a weak yen. The Nikkei Stock Average fell 2.5% to 38,126.33. Earnings are under scrutiny. The 10-year Japanese government bond yield decreased by 2.5 basis points to 1.030%.

Indian shares edged higher, with the Sensex rising 0.15% to 81,867.55. Investors responded positively to Fed Chair Jerome Powell's comments suggesting a possible rate cut in September. Utility stocks led gains, with Power Grid Corp. of India up 3.6% and NTPC rising 1.75%. Decliners included Tata Steel (-1.4%) and Tata Motors (-1%).

In the UK, stocks fell, with the FTSE 100 Index down 1% to 8,283.36.

Among large companies, Melrose Industries PLC posted the largest decline, dropping 13%, followed by Vesuvius PLC, which fell 12%, and Schroders (LON:SDR) PLC, down 9.7%.

On the positive side, Coats Group PLC surged 13%, Next PLC rose 8.3%, and Oxford Nanopore Technologies PLC climbed 7.6%.

Elsewhere in Europe, markets closed lower. The STOXX Europe 600 Index fell 1.2% to 511.83, Germany's DAX dropped 2.3% to 18,083.05, and France's CAC 40 declined 2.1% to 7,370.45.

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