Asian stock markets fell Thursday after the Federal Reserve talked about possibly reducing US economic stimulus and Japanese officials prepared to declare a coronavirus state of emergency during the Olympics due to a surge in infections. Market benchmarks in Shanghai, Tokyo, Hong Kong and Seoul retreated. Sydney gained.
Also Thursday, South Korea reported a one-day record increase of 1,275 new coronavirus infections, adding to the region's anxiety about disease risks. Overnight, Wall Street closed at a new high, propelled by gains for technology, industrial and health care stocks.
Minutes of the Federal Reserve's latest meeting in June gave an upbeat outlook for a US economy recovery and showed board members discussed how and when they might reduce monthly bond purchases that inject money into the financial system. "With the initial heavy lifting from economic reopening mostly factored in, the pace of reduction in unemployment rate ahead carries some uncertainty," said Yeap Jun Rong of IG in a report.
"The Fed minutes reinforces that much awaits to be seen in the data ahead to guide policies pullback." The Shanghai Composite Index lost 0.8 per cent to 3,526.07 after the Chinese Cabinet announced it will free up more money for lending by reducing the amount of deposits banks are required to hold in reserve.
The Hang Seng in Hong Kong fell 2.8 per cent to 27,193.52, hurt by declines for Chinese tech stocks. They have been hit by increased enforcement of anti-monopoly and other rules including an order to ride-hailing service Didi to stop taking on new users while it overhauls how it handles customer data.
Hong Kong-traded shares of e-commerce giant Alibaba Group lost 2.3 per cent and entertainment and social media operator Tencent Holding Ltd. slid 3 per cent. The Nikkei 225 in Tokyo lost 0.9 per cent to 28,118.03 after experts recommended a state of emergency in Tokyo from Monday through Aug 22.
Possible measures include closing bars and restaurants that serve alcohol and a request to the public to stay home. City leaders also have the option of shutting department stores and other businesses. In South Korea, the Kospi lost 1 per cent to 3,252.68. On Wall Street, the benchmark S&P 500 index rose 0.3 per cent to 4,358.13. The Dow Jones Industrial Average added 0.3 per cent to 34,681.79.
The Nasdaq composite gained less than 0.1% to a record 14,665.06. Apple rose 1.8 per cent, Otis added 2 per cent and Biogen gained 3 per cent. Energy and other sectors slid. Investors have swung between enthusiasm about an economic recovery and unease that the Fed and other central banks might roll back stimulus to cool pressure for prices to rise.
The Fed minutes showed officials are moving closer to reducing bond purchases, though most analysts don't expect a reduction until late this year. At their previous meeting, policymakers said they planned to raise interest rates as soon as 2023, earlier than previously expected.
"The Fed's minutes showed that a taper announcement still seems poised for the August/September time frame," said Edward Moya of Oanda in a report. "The Fed has already pointed out they are a little nervous about inflation, and the minutes confirmed that fear."