Asian stocks fall on Fed fears after Wall Street sell-off
Asian shares traded lower on Tuesday, echoing a broad sell-off on Wall Street amid speculation of another rate hike from the US Federal Reserve.
Standards in Asia slipped across the region in morning trade, including Japan, China, South Korea and Australia. The recent slide in the market comes as investors grapple with uncertainty over when the highest rate of inflation in decades will decline dramatically, how much the Fed will have to raise interest rates in order to control it, and how much higher prices will slow the economy.
Investors will be looking for insight into these unknowns later this week, when the Federal Reserve holds its annual meeting in Jackson Hole, Wyoming.
“The pessimistic mood on Wall Street is at play in the Asian trading session as well, and although another round of interest rate cuts to China’s benchmark lending rate yesterday may help mitigate some losses, the overall upside may remain limited amid risk aversion,” Yeap said. Jun Rong, Market Strategist at IG in Singapore.
The People’s Bank of China lowered its lending rate on Monday, a week after cutting interest rates.
Japan’s Nikkei 225 index lost 1.3% in morning trading to 28,413.04. Australia’s S&P/ASX 200 fell 0.5% to 7009.30. South Korea’s Kospi was down about 1.0% at 2,438.19. Hong Kong’s Hang Seng fell 0.7% to 19520.36, while the Shanghai Composite fell 0.3% to 3,267.19.
“Investors are being vigilant as continued risk-off flows have hit global markets,” said Anderson Alves of ActivTrades, noting that rising gas prices are a significant risk, especially for Europe.
The S&P 500 saw its biggest drop since mid-June, falling 2.1%, nearly doubling its losses from last week, when it broke a four-week winning streak. The Dow Jones Industrial Average was down 1.9% and the Nasdaq was down 2.5%.
Tech companies and retailers saw some of the biggest losses on Monday. Small-cap stocks also fell, sending the Russell 2000 Index down 2.1%.
Bond yields rose. The yield on 10-year Treasuries, which influences rates for mortgages and other loans, rose to 3.03% from 2.97% late Friday.
The broader market’s losses come on the heels of a weeks-long rally. Investors are trying to figure out where the economy is headed from here as stubborn hyperinflation hurts businesses and consumers. Record-high inflation has also prompted investors to focus on central banks and their efforts to fight high prices without hurting economic growth.
“You’ve had a significant upside and there is reason to be unsure where we’re going from here,” said Tom Martin, senior portfolio manager at Global Investments. “There is still a good potential for a recession.”
The minutes of the Federal Reserve’s July meeting last week confirmed the plans Further rate hikes despite signs of weak economic activity. Traders are concerned that aggressive steps to slow the economy may go too far and lead to a recession.
Federal Reserve Chairman Jerome Powell is scheduled to address Friday morning at the central bank’s annual meeting in Jackson Hole, which begins Thursday. The Federal Reserve holds its meeting after a heavy week of economic and corporate data that showed inflation is still weighing on the economy, but consumer spending remains resilient.
“I don’t think we’re out of the woods yet because of inflation,” Martin said. “We still don’t really know how inflation will end and what the Fed will do.”
In energy trading, benchmark US crude lost 54 cents to $90.23 a barrel. Brent crude, the international benchmark, rose 77 cents to $97.25 a barrel.
In currency trading, the US dollar fell to 137.14 yen from 137.49 yen. The euro didn’t change much at 99 cents.
Damian J. Troise and Alex Veiga, AP business writer contributed.
Yuri Kageyama is on Twitter at https://twitter.com/yurikagyyama