Volkswacht Bodensee - Tanking Alibaba drags Hong Kong as markets rally fades

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.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: FLAT at 33,422.93 (break)

Hong Kong - Hang Seng Index: DOWN 1.9 percent at 17,489.00

Shanghai - Composite: DOWN 0.3 percent at 3,041.32

Dollar/yen: DOWN at 150.47 yen from 150.76 yen on Thursday

Euro/dollar: UP at $1.0853 from $1.0851

Pound/dollar: DOWN at $1.2409 from $1.2411

Euro/pound: UP at 87.45 pence from 87.41 pence

West Texas Intermediate: UP 0.3 percent at $73.09 per barrel

Brent North Sea crude: UP 0.3 percent at $77.61 per barrel

New York - Dow: DOWN 0.1 percent at 34,945.47 (close)

London - FTSE 100: DOWN 1.0 percent at 7,410.97 (close)

-- Bloomberg News contributed to this story --

P.Staeheli--VB