HONG KONG: Equity markets in Asia and Europe were mixed on Friday as traders struggled to track another Wall Street rally, with below-par US data easing expectations for a sharper pace of interest rate hikes but adding to recession worries.
The euro gave back most of the gains enjoyed after the European Central Bank ramped up borrowing costs more than forecast, with energy concerns and Italian political turmoil fuelling worries of a recession in the currency union.
Investors have had a rollercoaster week as they try to gauge the outlook with earnings so far relatively positive but economic data mixed and geopolitical events clouding sentiment.
All three main indexes in New York enjoyed strong days thanks to a bump in tech firms, while another bigger-than-expected rise in US jobless claims indicated that higher Federal Reserve rates and a spike in inflation could be kicking in.
The reading — along with a big miss on the closely watched Philadelphia Fed business survey — could allow the central bank to pull back from its campaign of monetary tightening sooner, giving some relief to the world’s top economy.
The figures also suggested, however, that recessionary threats were rising and showed that the Fed has a tough task of doing enough to bring inflation down from four-decade highs while also nurturing fragile growth.
Analyst Tapas Strickland said July data was considered volatile owing to seasonal adjustments, but that the higher jobless claims were “consistent with growing anecdotes of hiring freezes and layoffs at several multinational companies” such as Google, Apple and Microsoft.
“A loosening labour market is being sought after by the Fed to put downward pressure on inflation, but with inflation remaining high we shouldn’t expect any pivot from the Fed,” he added.
Tech firms had enjoyed a broadly positive reporting season, he said, but for those in the “non-tech and non-financial sectors guidance has been weak on the outlook and consistent with a slowing economy”.
Asian markets started brightly but lost some of their lustre as the day wore on.
Tokyo, Hong Kong, Mumbai, Taipei, Singapore, Manila and Jakarta all posted gains but were off their highs, while Sydney was flat, and Shanghai, Wellington and Seoul edged down.
London, Frankfurt and Paris fluctuated in early trade. – AFP
