Chinese shares in Hong Kong fell as investors hit pause on their world-beating rally over the past month. Japanese stocks advanced after fresh weakness in the yen.
A gauge of Hong Kong-listed Chinese companies dropped as much as 4.9%, halting a 13-day rally that was fueled by optimism over measures to stimulate the economy. The Hang Seng Index sank as much as 4.5%, its biggest intraday drop in almost two years.
Markets in mainland China remain shut for Golden Week. Oil gained for a third day amid tensions in the Middle East, while US stock futures fell.
“It appears that the speculative surge has finally hit a speed bump, driven by cautious profit takers,” said Hebe Chen, an analyst at IG Markets Ltd in Melbourne.
Japanese shares rallied, with the Topix index rising more than 1% after new prime minister Shigeru Ishiba said the economy isn’t ready for another interest-rate increase.
The yen fell to a more than one-month low against the dollar, extending its 2% decline Wednesday.
See also: BOK surprises with rate cut as Trump win boosts trade risks
Renewed vigour in the dollar added to the pressure on the yen as stronger-than-expected ADP jobs data led traders to pare bets on aggressive US Federal Reserve (US Fed) rate cuts. Swaps traders were penciling in some 33 basis points (bps) of policy easing at the central bank’s November meeting, down from 44 bps just last week.
Last week, China’s central bank announced stimulus measures in a bid to reach this year’s economic growth target.
China’s CSI 300 Index officially entered a bull market on Monday, before closing for a week-long public holiday.
See also: ECB’s Schnabel sees only limited room for further rate cuts
“Clients are still questioning the effectiveness of Beijing’s stimulus measures,” said Sonija Li, an analyst at MIB Securities Hong Kong Ltd. “After the recent rally, now people are asking how much upside there remains. Surprisingly, there’s not much interest in the China property sector.”
Global equities are on course for their first weekly loss in four weeks amid the lingering threat of an escalation of geopolitical tensions in the Middle East as well as speculation over the pace of the US Fed’s monetary policy easing.
Investors focus will be on Friday’s nonfarm payroll data to further gauge the size of the next US Fed cut.
Oil rose as investors awaited Israel’s response to Iran’s missile attack, with US President Joe Biden urging Israel to hold off from attacking Iran’s nuclear facilities.
Bloomberg’s dollar index rose for a fourth day, bolstered by rising treasury yields.
The US 10-year yield rose one basis point to 3.79% in Asian trade after jumping five basis points in New York amid the flare-up in Middle-East tensions.
