NEW YORK – Asian equity markets were mixed on Tuesday after a sell-off in bonds on Wall Street stoked concerns about a possible economic slowdown in the US and Australia hiked interest rates.
Shanghai and Tokyo rose while Hong Kong and Seoul fell. The yen, trading at a two-decade low, continued to fall below 132 against the dollar.
Wall Street’s benchmark S&P 500 index rose 0.3% on Monday and the market price of a 10-year government bond fell. That increased its yield, or the difference between the spot price and the payout at maturity.
The gap between short- and long-term Treasury yields is narrowing, which “makes me a little nervous” because it suggests investors think a US recession is more likely, Oanda’s Jeffrey Halley said in a report.
“I don’t think the US is in stagflation yet,” or in a period of high inflation and low growth, “but if oil stays above $120.00 a barrel, it could be there soon,” Halley said .
The Shanghai Composite Index rose 0.2% to 3,243.17 after Chinese authorities eased anti-virus restrictions that shut down businesses in Shanghai and other major cities.
Tokyo’s Nikkei 225 rose 0.4% to 28,032.94, while Hong Kong’s Hang Seng slipped 0.5% to 21,544.06.
Sydney’s S&P-ASX 200 fell 1.4% to 7,110.00 after Australia’s central bank hiked interest rates by 0.5 percentage point, the widest range in 22 years to cool inflation, which was on a two-decade basis -High lies.
Seoul’s Kospi fell 1.6% to 2,628.61 and India’s Sensex opened 1.1% to 55,060.01. New Zealand and Singapore retreated while Jakarta advanced.
Markets vacillate between gains and losses as investors weigh evidence that the Fed’s rate hikes can cool inflation, which is at a four-decade high, without plunging the US economy into recession.
On Monday, the S&P 500 rose to 4,121.43 after gaining as much as 1.5% on the day. The index is down 13.5% from its Jan. 3 peak.
The Dow Jones Industrial Average rose less than 0.1% to 32,915.78. The Nasdaq Composite was up 0.4% to 12,061.37.
The yield on the 10-year government bond, or the difference between the market price and the payout if held to maturity, rose back above 3% to 3.04% from 2.95% late Friday.
The Treasury yield is approaching where it was in early and mid-May. It then hit its highest level since 2018 amid expectations that the Federal Reserve will aggressively hike rates.
Long-term bond buyers typically demand a higher payout in exchange for keeping their money locked up longer. A flattening of the yield curve or a declining long-term payout on short-term bonds is seen as an indicator of a possible recession, as it shows that investors expect economic conditions to be worse than they are now.
Economists at Goldman Sachs said in a research note they still see the Fed and its Chair Jerome Powell on track to successfully walk the line and achieve a “soft landing” for the economy. That was more encouraging than some of the warnings that weighed on markets last week, including one from JPMorgan Chase CEO Jamie Dimon, who said he was preparing for an economic “hurricane.”
On Wall Street, companies in the solar energy industry were among the biggest winners after President Joe Biden ordered emergency measures to boost US solar panel production and exempted Southeast Asian panels from tariffs for two years.
In the currency markets, the yen fell to 132.89 against the dollar from 132.01 on Monday.
The yen has weakened as Japanese interest rates have stayed near record lows while interest rates in the United States and Europe are rising. That helps Japanese exporters, but increases the prices consumers and manufacturers pay for imported goods and materials.
The euro fell from $1.0691 to $1.0673.
Benchmark US crude was up 62 cents in electronic trading on the New York Mercantile Exchange to $119.12 a barrel. The contract fell 37 cents the previous day to $118.50. Brent crude, the price basis for international oil trading, rose 56 cents to $120.07 a barrel in London. The loss fell 21 cents to $119.51 in the previous session.
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https://www.local10.com/business/2022/06/06/early-gains-fade-on-wall-street-as-trading-remains-choppy/ Asian markets were mixed following the sell-off in Wall Street bonds