TOKYO (AP) – Asian shares declined yesterday after stocks tumbled on Wall Street as worries persist about higher interest rates and their tightening squeeze on the global economy.
Tokyo’s benchmark Nikkei 225 dipped 1.4 per cent in afternoon trading to 27,102.21.
Australia’s S&P/ASX 200 slipped 0.3 per cent to 7,314.50. South Korea’s Kospi dropped 1.6 per cent to 2,419.15. Hong Kong’s Hang Seng slipped 0.3 per cent to 20,461.32, while the Shanghai Composite shed 0.6 per cent to 3,287.64.
New Zealand’s central bank raised its benchmark interest rate by a half-point to 4.75 per cent to try to wrestle down inflation.
United States (US) employment and consumer spending have weathered higher interest rates well, but a report on Tuesday showed sales of previously occupied homes slowed to their slowest pace in more than a decade.
The mixed signals leave investors wondering if the Federal Reserve (Fed) will ease back on rate hikes or resume a more aggressive stance.
“Amid the evolving new narrative of stronger US growth, payrolls, retail sales, and the additional Fed response required to tame the rude health of the US economy, investors are beginning to think the hawkish Fed may not have entirely run its course yet,” Stephen Innes of SPI Asset Management said in a commentary.
The S&P 500 fell two per cent to 3,997.34 on Tuesday for its sharpest drop since the market was selling off in December.
The Dow Jones Industrial Average lost 697 points, or 2.1 per cent, to 33,129.59 while the Nasdaq composite sank 2.5 per cent to 11,492.30. Home Depot fell to one of the market’s larger losses after giving financial forecasts that fell short of Wall Street’s expectations.
It dropped 7.1 per cent despite reporting stronger profit for the last three months of 2022 than expected.
The retailer said it would spend USD1 billion to increase wages for hourly US and Canadian workers.
That fed into broader worries for markets that rising costs for companies have been eating into profits, which are one of the main levers that set stock prices.
Rates and stock prices are high enough that strategists at Morgan Stanley say US stocks look to be more expensive than at any time since 2007.
The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, leaped further to 3.95 per cent from 3.82 per cent last Friday.
The two-year yield, which moves more on expectations for the Fed, rose to 4.72 per cent from 4.62 per cent. It’s close to its highest level since 2007.
Yields have shot higher this month as Wall Street ups its forecasts for how high the Fed will take short-term interest rates in its efforts to stamp out inflation.
The Fed has already pulled its key overnight rate up to a range of 4.50 per cent to 4.75 per cent, up from basically zero at the start of last year.
The worry is that the Fed could ratchet up its forecasts for rates further next month when it releases its latest projections for the economy.
Besides showing more strength in the job market and retail sales than expected, recent reports have also suggested inflation is not cooling as quickly and as smoothly as hoped.
Investors are also pushing back their forecasts for when the first cut to rates could happen.
Those worries have caused the strong rally by Wall Street early in the year to stall.
Having risen as much as 8.9 per cent, the S&P 500 is now clinging to a gain of 4.1 per cent for the year so far.
In other trading yesterday, benchmark US crude lost 35 cents to USD76.01 a barrel in electronic trading on the New York Mercantile Exchange.
Brent crude, the international pricing standard, fell 37 cents to USD82.68 a barrel.
The US dollar fell to JPY134.85 from JPY134.92.
The euro rose to USD1.0659 from USD1.0653.