Hong Kong - Asian stocks fell Friday as a rally fuelled by the likely end of US interest rate hikes ran out of puff, while Alibaba dragged Hong Kong down after saying it would cancel the planned spinoff of its cloud computing arm.
After an exciting few days on trading floors, the week headed for a tepid
finish, with Wall Street drifting even as a forecast-beating jump in US
jobless claims added to optimism the central bank would not tighten again.
The latest labour market figures follow weaker-than-expected prints on
consumer and producer price inflation, which indicated more than a year of
rate hikes were having the desired effects.
The readings sparked a surge across markets and sent Treasury yields
tumbling, with some traders even entertaining the idea of several cuts to
borrowing costs next year.
"This unexpected increase may further reinforce the view that the economic
situation may require or at least suggest a shift in the Federal Reserve
policy is warranted," said Stephen Innes at SPI Asset Management.
"When taken with cool reads on consumer and producer prices, this week's
claims update argues, at minimum, against additional Fed hikes."
However, traders remain on edge that the Fed has left the door open to a
possible hike if data takes a turn for the worse, leading to warnings the
economy could be in danger of slipping into recession.
Those worried about a downturn pointed to unemployment benefits being at
their highest in two years, factory production dropping more than forecast and
homebuilder sentiment at its weakest in 2023.
In early trade, Sydney, Seoul, Singapore, Manila, Jakarta and Wellington
were in the red. Tokyo was marginally lower.
Taken aback'
Hong Kong led the losses as market-heavyweight Alibaba was hammered more
than nine percent after its shock decision not to spin off its cloud computing
arm because of the US-China chip war.
In one of its most wide-ranging restructurings, Alibaba said in March it
planned to split the vast group into six distinct entities that would be able
to separately pursue funding through public listings.
But on Thursday, it called off the creation of its Cloud Intelligence arm
in light of "the recent expansion of US restrictions on export of advanced
computing chips".
Washington has cited national security grounds in moving to bar the
shipment to China of powerful chips, including those from California-based
Nvidia, which are crucial to the development of artificial intelligence.
The firm said in an earnings release Thursday that the spinoff "may not
achieve the intended effect of shareholder value enhancement".
"Accordingly, we have decided to not proceed with a full spin-off, and
instead we will focus on developing a sustainable growth model for Cloud
Intelligence Group under the fluid circumstances," it added.
The announcement surprised traders, and its US-listed shares tanked more
than nine percent, as it was one of the most high-profile victims of the
China-US standoff.
It was the latest blow to the firm, which has in recent years been under
the hard gaze of Beijing and hit by a series of restrictions on the domestic
tech sector
"I was quite taken aback," said Kevin Net, at Tocqueville Finance. "My
initial thoughts are that the whole corporate restructuring... could be at
risk."
And Forsyth Barr Asia's Willer Chen simply said: "The market is scratching
its head."
Crude prices inched higher but made very little headway into Thursday's
collapse of more than almost five percent that came on the back of demand
worries, China's economic woes and rising US stockpiles.
West Texas Intermediate fell into a bear market having shed more than 20
percent from its recent peak, with pledges from Saudi Arabia and Russia to
maintain output cuts unable to provide enough support (AFP).
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