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Asian Stocks Mixed, Take “Breather” as Investors Digest Clarida Comments

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By Gina Lee

Investing.com – Asia Pacific stocks were mixed on Thursday morning. Shares in the region steadied after U.S. counterparts fell. Investors also continued to digest mixed economic data and caution-tinged comments from the U.S. Federal Reserve about the schedule for asset tapering and interest rate hikes.

Japan’s Nikkei 225 was up 0.31% by 10:49 PM ET (2:49 AM GMT) while South Korea’s KOSPI inched down 0.05%.

In Australia, the ASX 200 was up 0.23%. Trade data released earlier in the day said that exports rose 4% month-on-month in June, imports grew 1% month-on-month and the trade balance stood at AUD10.496 billion.

Hong Kong’s Hang Seng Index inched up 0.10%. China’s Shanghai Composite edged down 0.12% and the Shenzhen Component was down 0.47%.

In the U.S., the S&P 500 fell from a record during the previous session thanks to a dip in energy shares, while the tech sector proved more resilient. Meanwhile, U.S. Treasury yields were on an upward trend.

Fed Vice Chairman Richard Clarida said on Wednesday that the Fed is on track to hike interest rates in 2023 and announce its plans for asset tapering later in 2021. His comments also helped to cement market bets for an initial interest rate hike in early 2023.

U.S. economic data released as Clarida was speaking said the ADP non-farm employment change was at 330,000 in July, lower than expected. The services purchasing managers' index (PMI) was 59.9, the Institute of Supply Management (ISM) non-manufacturing employment was at 53.8 and the ISM non-manufacturing PMI was at 64.1.

Investors now look to Friday’s U.S. jobs report, including non-farm payrolls, to gauge the Fed’s next move.

Although Clarida remained optimistic about the outlook, he admitted that the continuous increase in COVID-19 cases involving the Delta variant globally is a big downside risk. The number of COVID-19 cases globally topped 200 million as of Aug. 5, according to Johns Hopkins University data.

Clarida’s colleagues at the Fed also expressed their views. St. Louis President James Bullard stuck to the central bank's mantra that the jump in U.S. inflation will be temporary but added it will be “more persistent” than expected. Meanwhile, Dallas President Robert Kaplan called for asset tapering to begin gradually if the labor market continues to make progress in its recovery.

In other central bank news, the Bank of England (BOE) will hand down its policy decision later in the day, with the Reserve Bank of India’s decision following on Friday.

Global shares remained close to record levels as investors weigh the Fed outlook, strong corporate earnings and challenges to the economic recovery from COVID-19. The ongoing regulatory crackdown in China, impacting sectors such as private education and technology, also remains a focal point.

Some investors remained cautious.

“The market’s signaing we’re not out of the woods yet... on the other hand, we’ve had a very strong year. It’s rational for the market to take a deep breath,” Grace Capital president and chief investment officer Cate Faddis told Bloomberg.

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