Asian shares are declining in muted trading as investors await an upcoming report on U.S. inflation, an important indicator for where interest rates and global growth might go in the coming months
TOKYO AP" target="_self">(AP) — Asian shares declined in muted trading Wednesday as investors awaited an upcoming report on inflation in the United States, an important indicator for where interest rates and global growth might go in the coming months.
Japan's benchmark Nikkei 225 lost 0.4% in afternoon trading to 29,136.92. Australia's S&P/ASX 200 inched down 0.1% to 7,255.70. South Korea's Kospi slipped 0.9% to 2,488.42. Hong Kong's Hang Seng dipped 0.4% to 19,783.56, while the Shanghai Composite shed 1.4% to 3,309.98.
Market watchers are also worried about any signs of economic woes in China after recent data showed imports were lagging, even as exports continued to grow, although at a slower pace than before.
Focus remains on what the U.S. Federal Reserve might do on interest rates. Although the general consensus is that hikes are over for now, that view could quickly change.
“Market reaction is expected to be skewed in the event of a miss on the data, as the Fed has indicated it is prepared to raise interest rates again if needed,” said Anderson Alves at ActivTrades.
On Wall Street, the S&P 500 fell 18.95 points, or 0.5%, to 4,119.17. The Dow Jones Industrial Average lost 56.88, or 0.2%, to 33,561.81, while the Nasdaq composite fell 77.37, or 0.6%, to 12,179.55.
So far this earnings reporting season, which is approaching its final stretch, the majority of companies have been topping forecasts for first-quarter results. That’s largely because expectations were set quite 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 weaker profits from year-earlier levels.
Many worries
“Companies have been able to do pretty well,” said Margie Patel, senior portfolio manager at Allspring Global Investments.
The better-than-feared results have given some support to Wall Street even as many other worries weigh on it.
Key among them is what will happen to the U.S. banking system, which is under stress after three high-profile bank failures since March. Hurt by much higher interest rates, smaller and mid-sized banks are scrambling to reassure everyone that their deposits are stable and that they aren’t at risk of a sudden exodus of customers.
The next big milestone for the market will be Wednesday’s report on inflation at the consumer level. Inflation has come down from its peak last summer, but it remains stubbornly high. That’s raised uncertainty about what the Federal Reserve’s next move will be.
The central bank has already yanked its benchmark interest rates to a range of 5%-5.25%, up from from virtually zero in early 2022. High rates can undercut inflation, but only by smothering the economy and hurting investment prices bluntly.
HIgher rates
Many investors are preparing for a recession to hit later this year because of much higher rates, as well as the potential for banks to pull back on lending because of the industry’s troubles. Even though the job market has remained resilient and the unemployment rate is remarkably low, other areas of the economy — like manufacturing — have shown more weakness.
Worries about a recession and expectations for possible cuts in rates by the Fed have caused yields to pull back since early March.
In the bond market, the 10-year Treasury yield rose to 3.52% from 3.51%. The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.02% from 4.00%.
In energy trading, benchmark U.S. crude lost 57 cents to $73.14 a barrel. Brent crude, the international standard, fell 55 cents to $76.89 a barrel.
In currency trading, the U.S. dollar rose to 135.35 Japanese yen from 135.18 yen. The euro cost $1.0971, inching up from $1.0967.