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Asian markets traded mixed on Thursday following higher than forecast U.S. inflation numbers. Australia’s benchmark index rose while Chinese equities slipped. Japan’s Nikkei hit a 33-year peak as the yen extended losses.
U.S. consumer prices rose 0.6% in August, slightly above estimates. The year-over-year inflation rate hit 3.7%, exceeding expectations of 3.6%. Core inflation, excluding food and energy, increased 4.3% annually. The data showed inflation remaining stubbornly high, keeping pressure on the Federal Reserve to maintain aggressive rate hikes.
In Asia, Australia’s S&P/ASX 200 climbed 0.46%, closing at 7,186.5. The country’s unemployment rate held steady at 3.7% in August, matching forecasts. Japan’s Nikkei 225 jumped 1.41% to end at 33,168.1, surpassing 33,000 for the second time in over two months. The Topix index gained 1.13%, reaching a new 33-year peak.
South Korea’s Kospi rose 1.51% to 2,572.89 while the tech-heavy Kosdaq added 1.61%. Hong Kong’s Hang Seng edged up 0.21% in afternoon trade. Chinese indexes retreated slightly, with the Shanghai Composite dipping 0.11% and the CSI 300 down 0.08%.
Overnight on Wall Street, the Dow fell 0.46% while the S&P 500 inched up 0.12%. The tech-focused Nasdaq Composite rose 0.29%. U.S. equity indexes remain down 15% to 25% in 2022 on fears of slowing growth and aggressive Fed tightening.
Japan Unlikely to Unwind Ultra-Easy Policy Soon
The Bank of Japan may delay unwinding its ultra-accommodative monetary policy despite rising expectations of a pivot, according to Daiwa Securities deputy president Keiko Tashiro.
BOJ governor Kazuo Ueda reportedly said the central bank could have enough data by year-end to judge if wages are sustaining rises. This could enable the BOJ, which holds rates at -0.1%, to finally begin lifting interest rates.
But Tashiro noted Daiwa expects Japan’s inflation to decline from 2.8%-2.9% in 2023 to 1.8% in 2024, shy of the BOJ’s 2% target. “I think they’ll want to watch and see, because they don’t want to dampen anything that might happen if they raise interest rates too early,” she commented.
The BOJ has maintained super-easy policy for years trying to spur inflation and growth. Rapid yen depreciation this year finally pushed Japan’s inflation up. But the BOJ remains cautious about withdrawing stimulus too hastily.
Shares of Chinese EV Makers Fall After EU Launches Probe
Shares of major Chinese electric vehicle manufacturers listed in Hong Kong fell after the European Commission announced an anti-subsidy investigation.
BYD stock slid as much as 2.9% while Xpeng and Li Auto shares shed over 2%. The stocks pared losses but remained mostly lower.
EU Commission President Ursula von der Leyen said Wednesday the probe will assess whether Chinese EVs benefit from unfair subsidies and other trade practices. The investigation could lead to duties on imports from China.
Beijing pushed back against the move. China’s automobile industry group said the EU needs to “objectively” consider China’s highly competitive EV supply chain. It firmly opposed the EU’s assessment.
The probe escalates trade tensions between China and Europe. But it could benefit European automakers threatened by fast-growing Chinese rivals.
Softbank Shares Dip After Arm’s $51 IPO Share Price
Softbank shares edged down after U.K.-based semiconductor firm Arm priced its Nasdaq IPO at $51 per share. Softbank owns a majority stake in Arm.
Softbank stock slipped over 2% earlier before paring losses. At $51 per share, Arm’s diluted market cap exceeds $54 billion including restricted stock units. Arm shares start trading on September 14.
The offering prices at least 95.5 million American depository shares, with Softbank retaining about 90% control post-IPO. Proceeds will help Softbank pare debt and fund investments as it continues aggressive asset sales.
Softbank acquired Arm in 2016 for $32 billion. Arm’s energy-efficient chip designs power smartphones and many other devices. The IPO tests investor appetite for chip firms as the sector grapples with weakening demand.
Australian Unemployment Steady in August, Labor Participation Hits New High
Australia’s unemployment rate remained unchanged at 3.7% in August, matching economist forecasts. The number of employed Australians rose by 64,900 as the participation rate climbed to 67%, topping estimates.
The steady rate extends Australia’s tight labor market that is driving sharp wage increases. But it also means the Reserve Bank of Australia may keep aggressively hiking rates to cool inflation running at 6.1%.
Australia’s economy proved resilient through the pandemic with help from high prices for export commodities. But rising living costs are squeezing household budgets. Still, demand for labor persists across most industries.
Analysts See Potential in New Arm Share Listing
Analysts expressed varying opinions on the appeal of newly listed Arm shares following the chip firm’s Thursday Nasdaq debut. Some see strong long-term growth potential while others urge caution around valuation.
Morgan Stanley, which underwrote the offering, set a price target of $67. The firm cited Arm’s dominance in mobile processors and expansion into new markets like automotive chips and data centers.
JPMorgan analysts initiated coverage with a neutral rating. They flagged Arm’s reliance on slowing smartphone growth and uncertainty around its future royalty stream. But they see possible 40% upside if Arm diversifies revenues.
Bank of America forecast 25% revenue growth through 2025 driven by new licensees and products. But it warned of risks from the uncertain macroeconomy and competition. The bank began coverage with a neutral rating.
Google Confirms Job Cuts in Recruiting Division
Google confirmed it is eliminating jobs in its recruiting organization as parent company Alphabet pulls back on hiring across the board.
The cuts impact several hundred recruiters and sourcers globally. Google plans to refocus the remaining recruitment staff on engineering and technical roles.
The move reflects macroeconomic challenges squeezing the tech sector. Alphabet CEO Sundar Pichai previously told employees the company would slow headcount growth over the next quarter.
Other tech giants also cut jobs or froze hiring as demand weakens. Facebook parent Meta plans to pare headcount growth. Apple halted most hiring outside of research and development.
The layoffs suggest tech firms are bracing for leaner times after years of booming growth during the pandemic. Google and Alphabet shares rose on a broad market rebound Wednesday.
Gold Prices Retreat From Three-Week High
Gold prices retreated from a three-week high reached Tuesday as traders took profits. The precious metal hit a session bottom of $1,927.20 per ounce on Wednesday, the weakest level since August 23rd.
Rising bond yields weighed on the non-interest-paying asset. The benchmark U.S. 10-year Treasury yield climbed back above 3.4% after Tuesday’s cooler than expected inflation report. Higher yields raise the opportunity cost of holding bullion.
Gold is highly sensitive to Fed policy as higher rates dull the metal’s appeal. Prices popped earlier this week on hopes of a potential central bank pivot. But hot August inflation dashed bets for the Fed to ease up on rate hikes.
Recession fears could still benefit gold long-term as a safe haven. But the Fed’s aggressive stance to crush inflation will likely keep pressuring prices for now. Gold remains down about 7% in 2022 amid dollar strength and rising yields.
Wall Street Debates Impact of New Apple iPhones, Watch
Wall Street analysts largely reacted positively to Apple’s Tuesday product launch. But some cautioned of potential risks to near-term earnings from iPhone production delays.
Pricing for the new iPhone 14 models came in below expectations. But the premium iPhone Pro versions offer major camera upgrades. Analysts welcomed the new ultra-wideband for enabling enhanced AR apps.
J.P. Morgan called pricing “the big surprise” but said new features justify Apple’s premium valuation. Morgan Stanley sees lower prices stimulating demand. Mizuho thinks Pro demand will offset any weakness in the standard models.
But Benchmark warned of downside risks to near-term results. It estimates the new iPhones could face up to a 4-week delay from Foxconn’s China plant due to worker unrest. Any shortage heading into the holidays could limit sales.
Apple expects supply constraints to ease in the coming months. But analysts will watch closely for any fallout on earnings from iPhone delays or softening consumer demand. The stock rose 1% Wednesday amid a broader market rebound.
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