Asian markets struggle to track Wall Street rally

Asian markets were mixed Friday following the previous day’s gains, with eyes on the release of key US jobs data later in the day, while investors are also assessing the outlook for central bank monetary policy in the face of surging inflation.

Equities around the world enjoyed a healthy run-up Thursday after the Federal Reserve finally announced its plan for tapering the vast bond-buying programme that has provided crucial support since it was put in place at the start of the pandemic.

The news removed a lot of uncertainty about officials’ response to a spike in inflation that is expected to last a lot longer than previously thought, and follows moves in other countries to step back from their ultra-easy measures as the world economy recovers.

However, the Bank of England’s decision Thursday not to lift rates shocked traders, who had taken recent indications from boss Andrew Bailey that it would do so.

While its board signalled a rise was still on the cards in the coming months, it raised questions about how quickly the financial leaders would tighten policy, with forecasts for the Fed’s own hiking timeline put back.

Bond yields, which indicate future pricing for interest rates, sank after the announcement and raised concerns about further uncertainty, particularly as inflation remains doggedly high owing to supply chain snarls, high commodity prices and wage growth. That has fuelled talk of a period of stagflation when prices surge but economic growth stalls.

“Rates are a global market,” Subadra Rajappa, at Societe Generale, said. “Global central banks seem to be pushing back on market expectations for aggressive policy action.” The BoE decision also hammered the pound, which sank against the dollar, and it struggled to recover on Friday sitting below $1.35, having been at $1.37 beforehand.

Still, Wall Street enjoyed another record, with tech firms the main beneficiaries as they are more susceptible to higher borrowing costs.

The S&P 500 and Nasdaq both chalked up new highs for a fifth straight day, though the Dow dipped. Markets in Paris and Frankfurt were also at new peaks. However, Asian investors struggled to pick up the baton. Hong Kong led the selling, with traders keeping a nervous eye on developments in the China Evergrande saga with a deadline Saturday for it to make an overdue payment on a bond.