Asian shares retreat as tech-led Wall Street rally stalls amid Fed, BOJ watch

Asian shares mostly retreated Friday after a rally in technology stocks led Wall Street to new records the previous day. Japan's Nikkei 225 switched from gains to losses, sliding about 1.4% to 44,667.88 in early afternoon trade after the Bank of Japan held its short-term rate at 0.5%. Japan’s August inflation cooled to 2.7% from 3.1% the previous month, a development market participants weighed against near-term stimulus. Across the region, Hong Kong’s Hang Seng index rose 0.1% to 26,576.59 while the Shanghai Composite dipped less than 0.1% to 3,830.65. Investors were awaiting a phone call later Friday between U.S. President Donald Trump and Chinese President Xi Jinping on tariffs and finalizing a deal to allow TikTok to keep operating in the United States. Australia’s S&P/ASX 200 climbed 0.6% to 8,799.80 after a softer jobs picture, while South Korea’s Kospi fell 0.7% to 3,436.48. India’s Sensex edged down 0.4%, trimming earlier gains, and Taiwan’s Taiex dipped 0.4%.

On Wall Street, a tech-led rally pushed the S&P 500 to a record Thursday as Nvidia and Intel helped drive gains after Nvidia announced a collaboration with Intel that includes a $5 billion investment in the chipmaker. Nvidia rose 3.5%, while Intel jumped 22.8% for its best day since 1987 as the pair outlined products for data centers and personal computers. The Dow Jones Industrial Average gained 0.3%, and the Nasdaq composite climbed 0.9%, with all three indexes at or near all-time highs.

The upbeat sentiment followed data showing fewer Americans filed for unemployment benefits last week than expected, underscoring a labor market that may be slowing more gradually than some analysts feared and sending Treasury yields higher. The Federal Reserve cut its benchmark rate for the first time this year and signaled more potential cuts, though Chair Jerome Powell warned policymakers could pivot quickly if inflation remains stubborn. The economy’s unusual mix—slower hiring progress paired with persistent inflation—continues to complicate the path for monetary policy and market expectations.

Investors also weighed the implications of ongoing U.S.-China tariff discussions and the TikTok status in the United States, with a Friday call between Presidents Trump and Xi viewed as a potential inflection point. Some strategists caution that equity valuations have run higher on expectations of rate relief and easing financial conditions, raising the stakes for any policy surprises that could derail the current rally.

Across markets, sentiment was mixed: the Russell 2000 index of small-cap stocks surged about 2.5% to push to new highs, reflecting demand for domestic growth plays that tend to benefit from looser financial conditions. In commodities, U.S. crude slipped 19 cents to $63.38 per barrel, while Brent fell 11 cents to $66.81. The U.S. dollar weakened against the yen, slipping to about 147.38 yen from 147.92 yen, and the euro traded near $1.1774.