Asian shares predominantly fell on Friday following a downturn on Wall Street, where a significant drop in Nvidia stock weighed heavily on the market.
Japan’s Nikkei 225 inched up by less than 0.1% to close at 38,645.63. This slight increase followed the government’s announcement that the inflation rate rose to 2.5% in May, up from 2.2% in April, marking the first increase in three months.
“We will have one more month of data before the next Bank of Japan meeting, which will be closely watched to determine if markets are getting ahead of themselves by anticipating a potential rate hike in September this year,” commented Yeap Jun Rong, a market analyst at IG.
Elsewhere in the region, Australia’s S&P/ASX 200 gained 0.1% to reach 7,780.40, while South Korea’s Kospi dropped 0.9% to 2,782.43. Hong Kong’s Hang Seng fell 1.7% to 18,022.42, and the Shanghai Composite declined nearly 0.4% to 2,993.57.
On Thursday, the S&P 500 on Wall Street decreased by 0.3%, closing at 5,473.17, after hitting an all-time high before the trading pause for Wednesday’s Juneteenth holiday. The Nasdaq composite retreated from its record high, slipping 0.8% to 17,721.59. In contrast, the Dow Jones Industrial Average rose 0.8% to 39,134.76.
Nvidia, after an early gain, reversed to a loss of 3.5%, endangering its eight-week winning streak. The chip manufacturer, a key player in the artificial intelligence (AI) boom, had recently overtaken Microsoft as the most valuable company in the market but lost that position back to Microsoft following its decline. Nvidia’s stock has surged 164% this year after tripling last year, driven by its pivotal role in the AI sector, which is anticipated to yield substantial productivity and profit growth.
Accenture’s shares jumped 7.3% despite reporting weaker-than-expected profit and revenue for the latest quarter, as the company highlighted $900 million in new bookings for generative AI, totaling $2 billion over the last three quarters, showcasing AI’s transformative potential.
However, the soaring gains for Nvidia and other AI-related stocks have sparked concerns about a possible market bubble driven by excessive investor enthusiasm. These gains have bolstered the stock market even amid signs of weakness in the U.S. economy, where high interest rates aimed at curbing inflation have impacted the housing market and manufacturing, with lower-income households struggling against rising prices.
In the bond market, Treasury yields rose following mixed economic reports. The number of U.S. workers filing for unemployment benefits decreased last week, but not as much as anticipated. Meanwhile, a report indicated growth in mid-Atlantic manufacturing, though slower than expected, and home builders started fewer new homes last month than projected.
A slowdown in the U.S. economy could alleviate inflationary pressures, potentially prompting the Federal Reserve to lower its main interest rate later this year, which would ease economic strain and boost investment prices. Fed officials have suggested the possibility of reducing their main interest rate once or twice this year, from its highest level in over 20 years, while many traders on Wall Street anticipate two or more cuts, according to CME Group data.
The 10-year Treasury yield increased to 4.25% from 4.22% on Tuesday, and the two-year yield, which closely follows Fed expectations, rose to 4.73% from 4.71%.
In energy trading, benchmark U.S. crude fell 11 cents to $81.18 per barrel in electronic trading on the New York Mercantile Exchange, and Brent crude, the international standard, dropped 13 cents to $85.58 per barrel.
In currency trading, the U.S. dollar traded at 158.90 Japanese yen, almost unchanged from 158.92 yen. The euro rose slightly to $1.0715 from $1.0702.
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