Some Asian stock markets pulled back Wednesday morning, ending a big start to 2018 for global equities, though Hong Kong’s benchmark climbed to a 10-year high.
The Hang Seng Index HSI, +0.20% ended morning trading up 0.7%, within 400 points of 2007’s record close and on track for its 12th straight daily gain, also a record.
Financials led the charge, with HSBC 0005, +1.42% up 1.5% to another three-year high, and Chinese majors rising as much as 2%. The sector also helped the Shanghai Composite SHCOMP, +0.23% — coming off eight consecutive gains, its longest streak since March 2015 — end morning action up 0.3%.
Japanese financials also gained, limiting the Nikkei’s drop NIK, -0.26% to 0.1% despite a stronger yen. The dollar JPYUSD, +0.790051% fell to ¥112.30 from ¥112.60 earlier.
Helping financials broadly were continued gains in government-bond yields. The yield on 10-year U.S. Treasurys hit 10-month highs Tuesday, and 10-year Japanese yields were recently up 0.015 percentage point at 0.08%, the highest since October.
JGB yields built on Tuesday’s gain after the Bank of Japan trimmed its purchases of longer-dated bonds. The bond-buying program, known as quantitative easing, had propelled markets higher the past year, so any retreat will be closely watched, said Dwyfor Evans, head of Asia-Pacific macro strategy at State Street.
“The QE-forever environment that we expected out of Japan now has a big question mark next to it,” he added. “The Bank of Japan may be more confident that they’ve slain the deflation monster and may move to a policy shift later in the year.”
Broadly, Asian equities were largely pulling back Wednesday after hitting multiyear highs in recent days. New Zealand was most laggard, hit by what some characterized as profit-taking and the effect of a stronger currency on export-reliant stocks. The NZX 50 NZ50GR, -0.81% ended down 0.8% with respiratory-care company Fisher & Paykel FPH, -2.12% falling 2.1%, continuing its early-year weakness.
Benchmarks in Australia XJO, -0.64% and Taiwan Y9999, -0.77% were down about 0.5% while Korea’s Kospi SEU, -0.42% shed 0.1% as Samsung Electronics 005930, -3.10% slid a further 2.5%. The index heavyweight had fallen 3% Tuesday after its fourth-quarter earnings estimate fell short of analysts’ expectations.
Elsewhere, Chinese inflation came in below expectations Wednesday. That seemed to have had little impact on the yuan as investors continued reacting to a central bank announcement Tuesday afternoon that banks could independently adjust the “countercyclical factor” it introduced last year to curb fluctuations in the currency.
Analysts at Nomura said yuan volatility should increase. After initially falling further Wednesday morning against the dollar, the yuan was recently up slightly on the day at 6.5225 to the dollar.
And oil futures kept climbing, reaching three-year highs. The U.S. benchmark rose 0.8% as an industry group said domestic oil inventories fell much more than expected in Wednesday’s weekly government report.