BANGKOK (AP) – Stocks mostly fell in Asia on Friday, with only Shanghai rising, after shares fell on Wall Street on expectations central banks will double down on fighting inflation with interest rate hikes.
Tokyo’s Nikkei 225 index was down 1.3% to 27,881.78, while the Kospi in Seoul was down 1.2% to 2,593.60. In Australia, the S&P/ASX 200 dropped 0.9% to 6,956.40. Hong Kong’s Hang Seng was down 0.2%, missing early gains to 21,828.86.
The Shanghai Composite index rose 0.6% to 3,257.59 after the government said consumer price inflation remained low at 2.1% in May. That leaves regulators more room to adjust policy to combat a protracted economic slowdown, compounded by widespread restrictions imposed to fight coronavirus outbreaks.
In another market-related move, China’s Security Regulatory Commission released a statement saying it has not yet evaluated and researched the resumption of a plan by fintech Ant’s Group’s to hold an initial public offering. This countered a report saying IPO approval was pending, but the commission said it supported listing shares of “qualified platform companies” in domestic and overseas markets.
The government’s quashing of Ant’s earlier effort to launch an IPO came amid a broad crackdown on big tech companies that hit markets, especially in Hong Kong, where many such companies are traded.
On Thursday, the S&P 500 tumbled 2.4% and benchmarks across the Atlantic also fell as the European Central Bank said it would raise interest rates next year. month for the first time in over a decade. Another increase is planned for September, possibly double the increase in July, and the central bank will also halt its bond-buying program next month.
It is part of a rising global tide in which central banks are removing the ultra-low interest rates that have underpinned borrowing, economic growth and stock prices during the pandemic and have also flooded markets with investments seeking higher returns. Now central banks are focused on slowing growth to contain high inflation.
The risk is that such moves could cause a recession if they are too aggressive. Even if central banks manage to perform the delicate balancing act and avoid a recession, higher interest rates could drive investors to switch from stocks to other types of investments.
The Fed is widely expected to raise its policy rate next week by half a percentage point, the second consecutive double-than-usual increase. Investors expect a third to be reached in July.
Where the Fed goes from there depends on the trajectory of inflation, which is why Wall Street is so focused on the latest reading of the US consumer price index, due out Friday morning. Economists expect this to show that inflation slowed slightly to 8.2% in May from 8.3% the previous month.
Investors have been looking for signs that inflation may already be past its peak, which would be good for markets because it could mean a less aggressive Fed.
The S&P 500 lost 97.95 points to close at 4,017.82, while the Dow Jones Industrial Average dropped 1.9% to 32,272.79. The Nasdaq composite was down 2.8% to 11,754.23.
European equities fell immediately after the European Central Bank’s rate announcement, which came before US markets opened. The CAC 40 index in Paris lost 1.4% and Germany’s DAX lost 1.7%.
A report showed a few more US workers who have filed for unemployment benefits. last week than economists had expected. This is a potentially negative sign, but the overall number still remains low.
Higher gasoline prices have been putting more pressure on both companies and households, increasing pressure on budgets. Oil prices fell modestly on Thursday but remain up about 60% on the year. Much of the jump is due to Russia’s invasion of Ukraine.
Benchmark U.S. crude lost 66 cents to $120.85 a barrel in electronic trading on the New York Mercantile Exchange. It gave 60 cents to $121.51 on Thursday.
Brent crude, the price standard for international trade, lost 72 cents to $122.35 a barrel.
In currency trading, the dollar weakened to 134.13 Japanese yen from 134.35 yen. The euro rose to $1.0634 from $1.0619.