By Gina Lee
Investing.com – Asia Pacific stocks were mostly down on Friday morning, retreating from Thursday’s rally. Investors digested earnings expectations and expectations that the increased U.S. fiscal spending promised by U.S. President Joe Biden could spur economic recovery.
Japan’s Nikkei 225 was down 0.37% by 9:52 PM ET (2:52 AM GMT). Data released earlier showed that the national Consumer Price Index (CPI) declined 1.2% year-on-year in December, the biggest annual fall recorded since September 2010. The index dropped 0.9% in November.
South Korea’s KOSPI was up 0.55%, while in Australia, the ASX 200 was down 0.30%.
Hong Kong’s Hang Seng Index fell 0.86%. It dropped as much as 1.3% after reports that the city's Yau Tsim Mong district will begin its first ever lockdown this weekend, impacting tens of thousands of residents.
China’s Shanghai Composite fell 0.77% and the Shenzhen Component was down 0.68%.
U.S. shares saw another record high during the previous session, with the S&P 500 boosted by advancing tech shares. Biden’s push for additional spending of up to $2 trillion and plans to ramp up the U.S. COVID-19 response also boosted U.S. shares.
Director of the National Institute of Allergy and Infectious Diseases Anthony Fauci was cautiously optimistic that COVID-19 infection rates may be plateauing in the U.S. based on seven-day averages.
Benchmark treasury yields remained higher after a small decline in initial jobless claims was reported on Thursday. There were 900,000 claims filed over the past week, against the 910,000 claims in forecasts prepared by Investing.com and the 926,00 claims reported during the previous week.
Some investors wondered whether global shares have already reached their peak.
“The markets had such a strong run yesterday after the presidential inauguration in the U.S. [on Wednesday] and the run-up to that, that the lead coming in from the U.S. is a bit messy,” AMP (OTC:AMLTF) Capital (ASX:GLIN)chief economist Shane Oliver told Reuters.
“A lot of the good news is out there. I suspect a fairly flat day,” Oliver added.
However, some investors were more optimistic, with expectations still high for a $1.9 trillion COVID-19 stimulus package proposed by Biden earlier in the month. Republicans in Congress have expressed willingness to work with Biden on the top-priority plan, although some are arguing for a less expensive price tag.
Although Congress is now Democrat-controlled, Republican support is still required for the plan to be pushed through.
“While the recent rally clearly suggests that some of this recovery is already priced in, we see plenty of scope for investment flows to rotate from cash and other assets towards equities, once the recovery becomes more visible,” Janus Henderson Investors head of multi-asset Paul O’Connor told Bloomberg.
Across the Atlantic, the European Central Bank (ECB) handed down its policy decision on Thursday that kept interest rates steady. The central bank also pledged to provide more support for the economy if required.
ECB President Christine Lagarde also warned that ever-increasing COVID-19 numbers and restrictive measures, such as lockdowns, to curb the spread of the virus could challenge the region’s economic outlook.