TOKYO (AP) – Asian shares declined Wednesday amid discouraging data on China as well as concerns about the future of the US economy.
Japan’s benchmark Nikkei 225 fell 1.1% to 31,879.84 in morning trade. Australia’s S&P/ASX 200 fell 1.4% to 7,204.00. South Korea’s Kospi fell 1.2% to 2,539.48. Hong Kong’s Hang Seng slipped 1.2% to 18,364.11 and the Shanghai Composite fell 0.7% to 3,153.43.
New Zealand’s central bank left its benchmark interest rate unchanged at 5.5% on Wednesday. The Reserve Bank of New Zealand’s Monetary Policy Committee said that the core inflation rate has declined, but that core inflation remains very high. The committee said that reducing inflationary pressure would require lower spending in the long run. The New Zealand dollar was little changed on this news and was trading at around 0.6 to the US$.
“The recent set of disappointing economic data from China is not encouraging for the sector,” said Yep Jun Rong, market analyst at IG.
Clifford Bennett, chief economist at ACY Securities, believes strong US consumer spending may be transient and may fizzle out.
“This is probably due to the massive sales efforts that took place online from Amazon and at major stores in general. It may happen that in August all the profit of retail sales completely vanishes. Remember, we said this would be a strong result, but probably the last of good retail sales figures for a while,” he said.
On Wall Street, the S&P 500 fell 1.2%, one of its worst declines since the spring, when data showed a deep recession for the world’s second-largest economy. The Dow Jones Industrial Average fell 361 points, or 1%, and the Nasdaq Composite fell 1.1%.
In this year, the expectation was that China’s economy would grow substantially after the government lifted anti-Covid restrictions to support a global economy weakened by high inflation. But China’s recovery has faltered so much that it unexpectedly cut its key interest rate on Tuesday and released a report on how many of its young workers are jobless.
Worries about the impact on the rest of the global economy are dominating Wall Street, where stocks are already getting trimmed in August. The comeback comes after the gangbusters in the first seven months of the year, which critics have called hyperbole.
In the US, the economy remains more resilient than expected despite higher interest rates. A report on Tuesday showed sales at US retailers grew more than economists expected in July.
“U.S. retail sales are booming, and a lot of that could be on charge cards,” said Brian Jacobsen, chief economist at Anex Wealth Management. “Yet, the US consumer is showing some signs of recession.”
A strong retail sales report has raised hopes that the US economy can keep growing and avoid a long-expected recession. But the downside for markets is that it could also increase the Federal Reserve’s resolve to keep interest rates high in order to reduce inflation altogether.
The Fed has already raised its key interest rate to the highest level in more than two decades. Higher rates adversely affect the entire economy and hurt the prices of investments.
“Numbers like today’s make it more likely that rates will remain high for an extended period of time, even if the Fed doesn’t raise them next month,” said Mike Lowengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office.
Treasury yields initially rose after the retail sales report, reaching their highest level since the Great Recession of 2007-09, before trending up and down.
A faltering Chinese economy could mean less demand for oil and other commodities. In energy trade, benchmark US crude fell 7 cents to $80.92 a barrel. On Tuesday, the price of a barrel of US crude oil fell by $ 1.52 to $ 80.99. International benchmark Brent crude fell 7 cents to $84.82 a barrel.
The decline meant that stocks of energy producers were among the biggest decliners in the S&P 500. Exxon Mobil’s 2.6% decline was one of the heavier weights on the index.
Banks also sank following the high-profile failures of several banks during the spring, which were partly caused by high interest rates.
All told, the S&P 500 fell 51.86 points to 4,437.86. The Dow fell 361.24 to 34,946.39 and the Nasdaq fell 157.28 to 13,631.05.
In the bond market, the yield on the 10-year Treasury rose to 4.21% from 4.20% late on Monday. It helps set rates for mortgages and other important loans.
The two-year Treasury yield, which is closer to the Fed’s expectations, fell to 4.94% from 4.97%.
In currency trade, the US dollar declined to 145.49 JPY from 145.57 yen. The euro is priced at $1.0908, higher from $1.0904.
,
Associated Press Writer Nick Perry and AP Business Writer Stan Chow contributed to this report.
Source: apnews.com
