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Asian stocks slide after interest rate swings drag Wall Street lower

BANGKOK – Stocks were mostly lower in Asia on Friday, with only Shanghai gaining after the government reported inflation held steady at just above 2% in May, leaving more room for policy action to boost sluggish growth.

Tokyo’s Nikkei 225 index fell 1.5% to 27,824.29, while Seoul’s Kospi lost 1.1% to 2,595.87. In Australia, the S&P/ASX 200 was down 1.3% to 6,932.00. Hong Kong’s Hang Seng slipped 0.3%, shedding early gains to 21,801.16.

The Shanghai Composite Index rose 1.4% to 3,284.83 after the government reported consumer price inflation remained subdued at 2.1% in May. This leaves regulators more leeway to adjust policies to counter an ongoing economic slowdown, exacerbated by widespread restrictions to combat outbreaks of the coronavirus.

In another market-related move, the China Security Regulatory Commission issued a statement saying it has yet to assess and investigate the revival of a plan by fintech firm Ant’s Group to conduct an IPO. That contradicted a report that said the IPO was pending approval, but the commission said it supported stock listings by “qualified platform companies” in domestic and foreign markets.

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The government’s suppression of Ant’s earlier efforts to launch an IPO comes amid a broad crackdown on big tech companies that has rattled markets, particularly in Hong Kong, where many such companies are traded.

On Thursday, the S&P 500 fell 2.4% and benchmarks across the Atlantic fell as well as the The European Central Bank announced that it would raise interest rates next month for the first time in more than a decade. Another hike is slated for September, possibly through the double hike in July, and the central bank will also end its bond-buying program next month.

It’s part of a growing global tide, with central banks lifting the ultra-low interest rates that supported borrowing, economic growth and stock prices during the pandemic, and also flooding markets with investments seeking higher yields. Now central banks are focused on slowing growth to quell the top inflation.

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The risk is that such movements could trigger a recession if they are too aggressive. Even if central banks can pull off the delicate balancing act and avoid a recession, higher interest rates may prompt investors to swap equities for other forms of investment.

The general expectation is that the Fed will hike interest rates by half a percentage point next week, the second straight hike by double the usual amount. Investors expect a third in July.

Where the Fed goes from there depends on the path of inflation. The latest US CPI report is due later Friday morning and economists expect inflation to have slowed slightly to 8.2% in May from 8.3% a month earlier.

Investors are hoping for signs that inflation may already have peaked, which would be good for markets as it could mean a less aggressive Fed.

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The S&P 500 slipped 97.95 points to close at 4,017.82, while the Dow Jones Industrial Average fell 1.9% to 32,272.79. The Nasdaq Composite fell 2.8% to 11,754.23.

A major factor in inflation is higher gasoline prices have put more pressure on both businesses and households and increased the pressure on budgets. Crude oil prices have risen by around 60% over the course of the year. Much of the jump is due to this Russia’s invasion of Ukraine.

From early Friday the This was reported by the AAA auto club The national average for a gallon normal in the United States reached $4.99.

Benchmark US crude oil fell 80 cents to $120.71 a barrel in electronic trading on the New York Mercantile Exchange. It was down 60 cents on Thursday to $121.51.

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Brent crude, the price standard for international trade, fell 70 cents to $122.37 a barrel.

In currency trading, the dollar weakened from 134.35 yen to 133.66 Japanese yen. The euro rose to $1.0639 from $1.0619.

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https://www.local10.com/business/2022/06/10/asian-shares-slip-after-rate-jitters-pull-wall-street-lower/ Asian stocks slide after interest rate swings drag Wall Street lower

Sarah Y. Kim

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