BANGKOK (AP) — Stocks fell Monday in Asia after Wall Street’s benchmark indexes ended their worst week since early December. US futures rose as oil prices fell.
Reports on inflation, the labor market and retail spending have been better than expected, prompting analysts to raise forecasts for how high the Federal Reserve will have to take interest rates to slow the US economy and cool inflation.
Higher rates put pressure on trading activity and investment prices. So far, they do not appear to be slowing growth as much as expected. The S&P 500 fell 1.1% on Friday to cap its third straight loss.
“It is becoming increasingly apparent that inflation and associated inflation expectations and wage pressures will not decline in a predictable linear fashion,” Mizuho Bank said in a comment. “Early trading on Monday suggests that risk aversion has carried over to Asian markets.”
Tokyo NIK Nikkei 225 Index,
edged 0.1% lower at 27,423 and the Kospi 180721,
in Seoul it fell 0.8% to 2,402.
In Hong Kong, the Hang Seng HSI,
lost 0.5% to 19,907 while the SHCOMP Shanghai Composite Index,
it was down 0.2% to 3,259. Australian S&P/ASX 200 XJO,
shed 1.1% to 7,224.80.
Bangkok was 0.3% lower, while the Sensex in Mumbai fell 0.7%.
On Friday, the S&P 500 SPX,
it closed 1% lower at 3,970.04. The Dow Jones Industrial Average DJIA,
fell 1% to 32,816.92, while the Nasdaq Composite COMP,
it lost 1.7% to 11,394.94.
Higher rates may reduce inflation, but they increase the risk of a recession.
The Fed’s preferred measure of inflation, reported on Friday, said prices were 4.7% higher in January than a year earlier, after ignoring food and energy costs because they can swing more quickly than others. . That was an acceleration of the December inflation rate and was higher than economists’ expectations of 4.3%.
It echoed other reports earlier in the month showing inflation at both the consumer and wholesale levels was higher than expected in January.
Other data on Friday showed that consumer spending, the largest part of the economy, returned to growth in January, rising 1.8% from December. A separate reading on consumer sentiment was slightly stronger than previously thought, while new home sales improved slightly more than expected.
Such strength, coupled with the remarkably resilient labor market, increases the likelihood that the economy will avoid a recession anytime soon.
Tech and high-growth stocks once again took the brunt of the pressure.
Investments considered to be the most expensive, the riskiest, or the ones that make their investors wait the longest for big growth are among the most vulnerable to higher rates.
Traders are raising their bets that the Fed will raise its benchmark rate to at least 5.25% and keep it that high through the end of the year. It is currently in a range of 4.50% to 4.75%, and was practically zero a year ago.
Expectations of a firmer Fed have caused yields in the Treasury market to soar further this month, and they rose further on Friday.
The 10-year Treasury yield TMUBMUSD10Y,
it held steady at 3.94%, from 3.89% on Thursday night. Helps set rates for mortgages and other major loans. The two-year yield TMUBMUSD02Y,
which is driven more by Fed expectations, rose to 4.79% from 4.71% and is near its highest level since 2007.
In other trading on Monday, benchmark US crude oil CL.1,
it lost 56 cents to $75.75 a barrel in electronic trading on the New York Mercantile Exchange. She gained 93 cents to $76.32 a barrel. Brent Crude Oil BRN00,
the price base for international trade, lost 65 cents to $82.51 per barrel.
The dollar DXY,
rose to 136.41 Japanese Yen USDJPY,
from 136.45 yen. The euro EURUSD,
fell to $1.0533 from $1.0549.