TOKYO (AP) – Asian shares declined in muted trade Wednesday as investors awaited an upcoming report on inflation in the United States, where interest rates and global growth could weigh in the coming months.
Japan’s benchmark Nikkei 225 was down 0.4% at 29,136.92 in afternoon trade. Australia’s S&P/ASX 200 closed down 0.1% at 7,255.70. South Korea’s Kospi slipped 0.9% to close at 2,488.42. Hong Kong’s Hang Seng fell 0.4% to 19,783.56, while the Shanghai Composite declined 1.4% to 3,309.98.
Market watchers are also concerned about any signs of an economic crisis in China, as recent data showed imports were declining, even as exports continued to rise, albeit at higher rates than before. in slow motion.
The focus remains on what the US Federal Reserve might do on interest rates. While the general consensus is that the surge is far from over, that view could change quickly.
“Market reaction to the data miss is expected to be skewed, as the Fed has signaled it is prepared to raise interest rates again if needed,” said Anderson Alves at ActiveTrades.
On Wall Street, the S&P 500 fell 18.95 points, or 0.5%, to 4,119.17. The Dow Jones Industrial Average fell 56.88, or 0.2%, to 33,561.81, while the Nasdaq Composite dropped 77.37, or 0.6%, to 12,179.55.
So far this earnings reporting season, which is reaching its final stages, most companies have topped forecasts for first quarter results. This is largely because expectations were low due to a slowing economy and high interest rates. Companies in the S&P 500 are still on track to report a second-straight quarter of profits that are weaker than year-ago levels.
“Companies have been able to perform very well,” said Margie Patel, senior portfolio manager at Allspring Global Investments.
Fears that better results have provided some support to Wall Street while other concerns weighed on it.
Chief among them is what will happen to the US banking system, which has been under stress since March following three high-profile bank failures. Hurt by very high interest rates, small and medium-sized banks are scrambling to assure everyone that their deposits are stable and they are not at risk of a sudden exodus of customers.
The next major milestone for the market will be Wednesday’s report on consumer level inflation. Inflation has come down from its peak last summer, but it still remains high. This has increased uncertainty about what the Federal Reserve’s next move will be.
The central bank has already raised its benchmark interest rates to a range of 5%-5.25%, well above near-zero by early 2022. Higher rates can reduce inflation, but only by smothering the economy and blunting investment prices.
Many investors are bracing for a recession later this year, as banks are likely to pull back on lending due to very high rates as well as industry troubles. Even though the job market remains resilient and the unemployment rate is remarkably low, other sectors of the economy – such as manufacturing – have shown greater weakness.
Yields have declined since early March on concerns about a recession and expectations of a possible rate cut by the Fed.
In the bond market, the 10-year Treasury yield rose to 3.52% from 3.51%. The two-year Treasury yield, which trades higher on Fed expectations, rose to 4.02% from 4.00%.
In energy trading, benchmark US crude fell 57 cents to $73.14 a barrel. International benchmark Brent crude fell 55 cents to $76.89 a barrel.
In currency trade, the US dollar advanced to 135.35 JPY from 135.18 yen. The euro moved up from $1.0971 to $1.0971.
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AP Business Writer Stan Cho contributed from New York.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
Yuri Kageyama, The Associated Press
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