TOKYO – Asian shares were mostly lower on Friday despite upbeat news on the U.S. economy, with Japan's benchmark falling after the latest data showed inflation has been slowing faster than expected.
Tokyo's Nikkei 225 declined 1.3% to finish at 35,751.07 as a key measure of inflation slowed faster than expected in January, to 1.6% from 2.4% in December. Weaker price increases relieve pressure on the Bank of Japan to tighten its ultra-lax monetary policy, which has pumped massive amounts of cash into markets. The central bank is targeting 2% inflation.
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“The BOJ will wait to gauge the underlying trend of the inflation path for the next few months. We expect inflation to rebound above 2% in February,” Robert Carnell, regional head of research Asia-Pacific at ING, said in a report.
Chinese markets ended a winning streak following a spate of moves by the government to shore up share prices and the property sector.
Hong Kong's Hang Seng slipped 1.6% to 15,954.86, while the Shanghai Composite was little changed, up 0.1% at 2,910.22.
South Korea’s Kospi rose 0.3% to 2,478.56. Markets were closed in Australia for a national holiday.
Thursday on Wall Street, the S&P 500 added 0.4% to 4,894.16 and set a record for a fifth straight day. The Dow Jones Industrial Average climbed 0.6% to 38,049.13, and the Nasdaq composite gained 0.2% to 15,510.50.
IBM helped lead the market with a gain of 9.5% after it reported a better profit for the latest quarter than analysts expected. Four out of five stocks in the S&P 500 rose alongside it, but Tesla kept the market’s gains in check with its drop of 12.1%.
The electric-vehicle maker reported earnings and revenue that fell short of forecasts and warned of lower sales growth this year.
Wall Street’s main focus was on a report indicating the U.S. economy continues to steam ahead, demolishing last year’s forecasts for an imminent recession because of high interest rates.
The economy grew at a 3.3% annual rate in the last three months of 2023, according to an initial estimate by the U.S. government. That was much stronger than the 1.8% growth economists expected, according to FactSet. Such a resilient economy should drive profits for companies, which are one of the main inputs that set stock prices.
The report also gave encouraging corroboration that inflation continued to moderate at the end of 2023. Hopes are high that inflation has cooled enough from its peak two summers ago for the Federal Reserve to start cutting interest rates this year. That in turn would ease the pressure on financial markets and boost investment prices.
“The headline data are the perfect mix of strong consumption and dropping inflation,” said Jamie Cox, managing partner for Harris Financial Group. “This is exactly what you want to see if you are running the Fed and want to move rates lower this year.”
A separate report showed that more U.S. workers applied for unemployment benefits last week, but the number remains low relative to history and indicates a still-resilient job market.
Treasury yields fell in the bond market on expectations for rate cuts. The yield on the 10-year Treasury slipped to 4.10% from 4.16% before the report’s release and from 4.18% late Wednesday. In October, it was at 5%, its highest level since 2007.
Elsewhere on Wall Street, earnings season continued to pick up the pace with more than two dozen companies in the S&P 500 reporting their latest results late Wednesday or early Thursday.
American Airlines rose 10.3% after reporting profit for the latest quarter that was much stronger than what analysts were expecting. On the losing end of Wall Street, Humana tumbled 11.7% after the insurer reported worse results for the end of 2023 than expected.
In energy trading, benchmark U.S. crude declined 50 cents to $76.86 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, fell 54 cents to $81.42 a barrel.
In currency trading, the U.S. dollar inched up to 147.85 Japanese yen from 147.64 yen. The euro cost $1.0817, down from $1.0848.