Asian shares mostly fall as rate hikes, China slowdown loom
TOKYO — Shares fell in most Asian markets on Monday as interest rate hikes and a slowing Chinese economy weighed on investor sentiment.
Oil prices rose and U.S. futures fell after sharp declines in Wall Street last week.
Benchmarks declined across the region. The benchmark in Jakarta fell by 4%.
Market players were awaiting Chinese trade data for April for an indication on how severely restrictions to curb the spread of COVID-19 infections have hurt the economy.
“The global investment community is slowly waking up to the idea we have touted for a long time: That there is a post-COVID-recovery-euphoria ‘hangover,’ coupled with associated inflation and now a European war and fresh inflation impetus as well as the world’s biggest port being closed,” said Clifford Bennett, Chief Economist at ACY Securities.
Japan’s benchmark Nikkei 225 lost 2.2% in morning trading to 26,410.30. South Korea’s Kospi dipped 0.9% to 2,621.24. Australia’s S&P/ASX 200 dropped 1.3% to 7,110.50. The Shanghai Composite was little changed, falling less than 0.1% to 3,001.62. Hong Kong markets were closed for a national holiday.
Investors are watching for the outcome of the presidential election in the Philippines, although it remains unclear how economic policies might change. Based on the majority of voter-preference surveys, Ferdinand Marcos’ son is the top contender in Monday’s vote.
Despite concerns about inflation and restrictions to coronavirus, the war in Ukraine remains a major source of uncertainty. More than 60 people were feared dead after a Russian bomb flattened a school being used as a shelter, Ukrainian officials said. In an apparent race for the city, Moscow’s forces attacked defenders at Mariupol’s steel mill in an apparent attack to capture it before Russia’s Victory Day holiday Monday.
“Russia’s Victory Day today will also bring geopolitical risks back into the limelight as well. Yeap Jun Rong is a market strategist at IG in Singapore. “President Putin will likely to reiterate his justifications for the Ukraine war, but markets may be monitoring any further efforts to increase military operations to secure that war,” Yeap Jun Rong said.
Shares closed lower at Wall Street on Friday, with the fifth consecutive weekly decline. There are concerns that the Federal Reserve’s attempts to control inflation by raising interest rates could cause a recession despite the strong U.S. job market. Wednesday’s increase in the Fed’s key short-term interest rate by 0.5 percentage point to 0. 75% to 1%, the highest level since the pandemic struck two years ago.
The S&P 500 fell 0.6% to 4,123.34. The Dow dropped 0.3% to 32,899.37. The Nasdaq gave up 1.4% to 12,144.66. The market fell more for smaller companies than the larger ones. The Russel 2000 slid 1.7% to 1,839.56. The Fed hopes to raise rates and slow down the economy enough to stop the highest inflation in 40 years. However, it could impede growth if it does so too fast or too often. Investors were reassured by Jerome Powell, Fed chair. He said that the central bank was not actively considering a bigger jump of 0. 75 percentage points at its next meeting.
In energy trading, benchmark U.S. crude gained 43 cents to $110. 20 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the basis for pricing oil for international trading, rose 77 cents to $113. 16 a barrel.
In currency trading, the U.S. dollar rose to 130. 98 Japanese yen from 130. 55 yen. The euro cost $1. 0510, down from $1.0545.
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