Chinese internet stocks tumbled after Friday’s regulatory news, dragging Asian shares lower for the last full trading week of the year, while the dollar wobbled ahead of US inflation data expected to confirm bets on a 2024 rate cut.
MSCI’s broadest index of Asia-Pacific shares outside Japan gave up gains to trade 0.3% lower after China published draft rules that would impose spending limits on players. For the week, the index fell by 0.6%.
Netease shares fell 29% at one point and Tencent shares fell more than 12%, sending the Hang Seng index down 1.2%.
“It’s not necessarily the regulation itself – it’s the political risk that is too high,” said Steven Leung, managing director of institutional sales at broker UOB Kay Hian in Hong Kong.
“People thought that this type of risk should be pushed aside and start looking at the fundamentals again. This is very damaging to confidence.”
Bank shares helped Japan’s Nikkei gain 0.2%. The euro surpassed $1.10.
Outside Asia, markets have been in a celebratory mood for weeks as global inflation data showed a slowdown and the Federal Reserve signaled it had ended interest rate hikes.
Two-year U.S. Treasury yields lost nearly 38 basis points in a week and a half and fell 2 basis points overnight as U.S. third-quarter core PCE inflation was revised down to 2%.
Markets are bracing for a downside surprise in the last key reading before Christmas, November’s personal consumption expenditure index due at 1330 GMT with consensus expectations for a 0.2% monthly rise.
“Analysts believe it should be no more than 0.2 percent,” National Australia Bank head of foreign exchange strategy Ray Attrill said in Sydney.
“Could we get 0.1%? It would probably take a 0.1% increase for the moves we’ve seen to continue.”
U.S. stocks rebounded overnight after a sharp drop at the end of Wednesday’s session, with the S&P 500 up 1%.
The index is less than 2% from its all-time high.
S&P 500 futures fell 0.1% in Asia and Nike shares fell nearly 12% in after-hours trading after the company cut its sales forecast amid consumer caution.
European futures markets remained stable.
Oil was expected to post a weekly gain on jitters about the safety of shipping in the Red Sea, but prices fell overnight after Angola said it would quit OPEC, raising questions about the producer group’s efforts to curb global supplies.
Brent crude futures rose 58 cents to $79.97 a barrel in Asian trading on Friday, marking a weekly gain of 4.5%.
A TALE OF TWO SHELTERS
In the foreign exchange market, the dollar was under pressure from markets expecting a rate cut of more than 150 basis points in 2024.
At $1.1002, the euro gained 1% this week, although similar rate cuts are expected in Europe next year. The common currency is also around 1% against the pound, which has fallen sharply this week after a surprise drop in inflation.
Sterling was set for its biggest weekly decline in three months against the euro and Australian dollar. It last bought at $1.2686 and traded at 86.71 pence per euro.
The dollar index fell 0.7% this week to 101.85. It decreased by 2.4% year-on-year. Among the G10 currencies, the best performer for the year was the Swiss franc, which rose almost 8% against the dollar, while the yen fell the worst at 7.8%.
NAB’s Attrill noted that the parallel movement of the two so-called “safe haven” currencies underlined the overwhelming influence of the Bank of Japan’s (BOJ) monetary policy. This kept interest rates negative while the rest of the world raised interest rates.
The dollar rose slightly to 142.43 yen on Friday.
Gold is expected to end the current week and year with a 12% year-over-year gain at $2,049 an ounce.
Bitcoin is up 160% year-to-date to $44,114.