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Asian stocks tend to fall when interest rates are rising and there are signs of a slowdown in China

TOKYO – Stocks fell in most Asian markets on Monday as interest rate hikes and a slowing Chinese economy weighed on investor sentiment.

Oil prices were higher and US futures fell after sharp falls on Wall Street last week.

Benchmarks fell across the region. The Jakarta benchmark fell 4%.

China reported that its exports rose 3.7% year on year to $273.6 billion in April, a sharp decline from March’s 15.7% growth as global demand slowed. That added pressure on the world’s second largest economy after Shanghai and other industrial cities were shut down to combat virus outbreaks.

Imports rose 0.7% to $222.5 billion in April, up from less than 1% growth in the previous month.

Businesses and investors fear the ruling Communist Party’s “zero-COVID” strategy, which has temporarily closed most businesses in Shanghai and other industrial hubs, will disrupt global trade and activity in automotive, electronics and other industries.

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But a slowing global economy is also taking its toll.

“Part of the blame lies with the outbreak of COVID-19 in China, which has led to labor shortages and bottlenecks in the logistics sector. But the magnitude of these disruptions should not be overstated,” Julian Evans-Pritchard said in a comment. “Instead, the drop in exports appears to mainly reflect weaker demand.”

The Shanghai Composite was little changed, falling almost 0.1% to 2,999.77. Markets in Hong Kong were closed for a national holiday.

Japan’s benchmark Nikkei 225 lost 2.5% to close at 26,319.34. South Korea’s Kospi fell 1.3% to 2,611.28. Australia’s S&P/ASX 200 fell 1.2% to 7,120.60. The benchmark in Jakarta, Indonesia, lost 4.4% as markets reopened after last week’s Eid al-Fitr holiday.

Investors are watching the outcome of the Philippines’ presidential election, although it remains unclear how economic policy might change. The son of long-ousted Philippine dictator Ferdinand Marcos is the front runner in Monday’s election, based on most voting preference polls.

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Apart from inflation concerns and corona restrictions, the war in Ukraine is still causing uncertainty. More than 60 people were feared after a Russian bomb leveled a school used as a shelter, Ukrainian officials said. Moscow forces stepped up their attack on defenders at the Mariupol Steelworks in what appeared to be a race to capture the city ahead of Russia’s Victory Day on Monday.

“Russia’s Victory Day today will also put geopolitical risks back in the spotlight. President Putin is likely to repeat his justification for the war in Ukraine, but markets may await further efforts to step up military operations to secure the war,” said Yeap Jun Rong, market strategist at IG Singapore.

Shares ended lower on Wall Street on Friday, for the market’s fifth straight weekly decline. Concerns are smoldering that despite strong US employment trends, the Federal Reserve’s efforts to tame inflation by raising interest rates could push the US economy into recession.

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The Fed’s hike in the short-term interest rate on Wednesday increased it by 0.5 percentage points to a range of 0.75% to 1%, the highest level since the pandemic two years ago.

The S&P 500 fell 0.6% to 4,123.34. The Dow fell 0.3% to 32,899.37. The Nasdaq fell 1.4% to 12,144.66. Smaller companies fell more than the broader market. The Russel 2000 slipped 1.7% to 1,839.56.

The Fed hopes to hike rates and slow the economy enough to wipe out the highest inflation in four decades, but risks stalling growth if it goes too far or too fast. Fed Chair Jerome Powell has reassured investors by saying the central bank is not “actively considering” a larger 0.75 percentage point jump at its next meeting.

In energy trading, the US crude index fell 36 cents to $109.41 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the basis for international trade oil prices, fell 12 cents to $112.27 a barrel.

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In forex trading, the US dollar rose to 131.13 Japanese yen from 130.55 yen. The euro cost $1.0509 compared to $1.0545.

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AP business writer Joe McDonald in Beijing contributed.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed without permission.

https://www.local10.com/business/2022/05/09/asian-shares-mostly-fall-as-rate-hikes-china-slowdown-loom/ Asian stocks tend to fall when interest rates are rising and there are signs of a slowdown in China

Joel McCord

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