Asian shares track Wall Street slide on expected rate raises

By YURI KAGEYAMA
AP Business Writer

TOKYO (AP) — Asian shares were mostly lower Thursday, tracking the broad slide on Wall Street, as investors braced for higher interest rates and inflation worries for some time.

Benchmarks fell in Tokyo, Sydney, South Korea and Hong Kong in early trading, but edged up slightly in Shanghai.

Japan’s benchmark Nikkei 225 declined 1.5% in morning trading to 27,673.14. Australia’s S&P/ASX 200 dropped 1.7% to 6,865.60. South Korea’s Kospi shed 1.7% to 2,429.75. Hong Kong’s Hang Seng lost nearly 0.8% to 19,799.92, while the Shanghai Composite edged up 0.3% to 3,212.96.

The slide in the Nikkei came despite signs of improvement in the Japanese economy. A study by the Finance Ministry on corporate financial statements for April-June showed a 17.6% improvement from the same period the previous year.

“At some point central banks will discover inflation is remaining high despite their interest rate hikes and they will stop. Unfortunately, for the economy on Main Street, that point is too far off in the distance. It is difficult to see any near-term end in sight for increased caution by consumers and businesses across Europe, China, and the U.S.A.,” said Clifford Bennett, chief economist at ACY Securities.

On Wall Street, the S&P 500 fell 31.16 points, 0r 0.8%, to 3,955, extending its losing streak to a fourth day. The index is down 17% so far this year. It ended the month with a 4.2.% loss after surging 9.1% in July.

The Nasdaq lost 66.93 points, or 0.6%, to 11,816.20, while the Dow gave up 280.44 points, or 0.9%, to close at 31,510.43. The Russell 2000 index of smaller companies fell 11.48 points, or 0.6%, to 1,844.12.

Technology stocks and big retailers were among the heaviest weights on the market. Only communications stocks eked out a slight gain.

The latest pullback for stocks came as Treasury yields rose broadly. The yield on the 10-year Treasury, which influences interest rates on mortgages and other consumer loans, rose to 3.17% from 3.11% late Tuesday.

Bond yields have been rising along with expectations for higher interest rates, which the Federal Reserve has been increasing in a bid to squash the highest inflation in decades.

“You have the bond market now taking the Fed seriously,” said Willie Delwiche, investment strategist at All Star Charts. “And it’s not that stocks can’t overcome that, but so far they haven’t overcome that.”

The last time stocks mounted a big rally was in July and early August, when bond yields came off their highs as expectations for higher rates eased.

“If the underlying trend in stocks is lower, then higher bond yields weigh on that,” Delwiche said.

Wall Street is worried that the Fed could hit the brakes too hard on an already slowing economy and veer it into a recession. Higher interest rates also hurt investment prices, especially for pricier stocks like technology companies.

Traders are now trying to get a better sense of how far and how quickly the Fed’s rate hikes will go. The Fed has already raised interest rates four times this year and is expected to raise short-term rates by another 0.75 percentage points at its September meeting, according to CME Group.

Technology stocks and big retailers were among the heaviest weights on the market Wednesday. Chipmaker Nvidia fell 2.4% and Best Buy slid 5.6%. Energy companies fell as the price of U.S. crude oil dropped 2.3%. Occidental Petroleum slipped 1.4%.

Those losses kept gains in communications stocks and elsewhere in the market in check.

In energy trading, benchmark U.S. crude fell 35 cents to $89.20 a barrel. Brent crude, the international standard, slipped $2.82, to $96.49 a barrel.

In currency trading, the U.S. dollar inched up to 139.56 Japanese yen from 139.04 yen. The euro cost $1.0026, down from $1.0054.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama