TOKYO: Asian shares erased earlier modest gains on Friday with sentiment dented by Wall Street’s weakness on concerns about the progress of U.S. tax reform, though regional stocks remain on track for a weekly rise. European stock futures STXEc1 were down 0.3 percent, suggesting a downbeat opening for the region, with DAX futures FDXc1 also down 0.3 percent, CAC futures FCEc1 down 0.2 percent and FTSE futures FFIc1 0.1 percent lower. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.4 percent, but poised to gain 0.8 percent for the week.
Chinese shares slumped, with the Shanghai Composite index .SSEC off 0.8 percent and the blue-chip CSI300 index .CSI300 down 1.1 percent.
Japan’s Nikkei stock index .N225 finished 0.6 percent lower at its lowest in more than a week, with mobile firms extending a sell-off on concerns of increased competition after e-commerce group Rakuten said it aims to become the country’s fourth wireless carrier. The index is down 1.1 percent for the week.
Big Japanese manufacturers’ business confidence improved for a fifth straight quarter in the three months to December to hit an 11-year high, the Bank of Japan’s quarterly tankan survey showed.
“The Nikkei came off its lows in the afternoon, largely on futures-led buying,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust. “But regional sentiment is still fragile, which will limit its upside.”
On Thursday, U.S. retail sales increased more than expected in November and the number of Americans filing for unemployment benefits dropped to near a 44-1/2-year low last week. That pointed to sustained strength in the economy that could pave the way for further Federal Reserve interest rate hikes next year.
The Fed hiked interest rates on Wednesday but left its rate outlook for the coming years unchanged even as policymakers projected a short-term jump in U.S. economic growth from the Trump administration’s proposed tax cuts.
“The Fed’s move this week was largely perceived as a dovish hike,” said Bill Northey, chief investment officer at the private client group of U.S. Bank in Helena, Montana.
“It was ultimately well within expectations, and I think the one surprise was how strong the upgrade was for 2018 without any corresponding upgrade for their expectations for inflation,” he said. “That keeps our expectations around three rate hikes for 2018.”
On Wall Street on Thursday, major U.S. stock indexes fell, with the S&P 500 .SPX down the most in a month, as investor worries over potential roadblocks to the Republicans’ tax overhaul more than offset optimism over the strong data. [.N]
Republicans in the U.S. Congress reached a deal this week on a final version of their debt-financed legislation to cut taxes for businesses and wealthy Americans, with House and Senate votes expected early next week. But the bill has yet to get needed support of some key Senators, and investors worry about downward pressure on stocks if the bill were to fail.