Tokyo, Jan. 31 (BNA): Asian stocks mostly fell in quiet trading on Tuesday as investors awaited interest rate decisions and earnings reports from around the world.
Traders await the US Federal Reserve’s interest rate decision, which is expected on Wednesday. They also monitor indicators for the Chinese economy, the main driver of growth in the region.
Japan’s Nikkei 225 fell 0.1% to 27,391.88. Australia’s S&P/ASX 200 rose nearly 0.1%, to 7,487.10. South Korea’s Kospi Index fell 0.4% to 2,440.25. Hong Kong’s Hang Seng fell 0.3% to 22011.37, while the Shanghai Composite fell 0.2% to 3262.62.
“China’s rapid reopening boosted domestic growth expectations, mild weather in Europe sharply reduced recession risks, and a string of better inflation news raised hopes that the Fed might be able to engineer a ‘soft landing’ in the US,” he said. Stephen Innes , managing partner at SPI Asset Management, according to the Associated Press (AP).
“Despite these shifts, recession risks in the United States remain a major concern and may be the greatest risk to the global cyclical picture,” he said.
Stocks fell Monday on Wall Street. The S&P 500 fell 1.3% to 4,017.77, giving up some of the gains that carried it last week to its highest level since early December. The Dow Jones Industrial Average fell 0.8% to 33717.09, while the Nasdaq Composite fell 2% to 1393.81.
Markets have been deflecting lately on fears that the economy and corporate earnings may be poised for a sharp decline, along with competing hopes that easing inflation will bring the Federal Reserve easy on interest rates.
The central bank’s next decision on interest rates is coming on Wednesday, and most investors expect it to announce an increase of just 0.25 percentage points. This would be the smallest increase since March, after a series of rises of 0.75 points and then an increase of 0.50 points, meaning less additional pressure on the economy.
Higher rates combat inflation by deliberately slowing the economy, while also lowering investment prices. Inflation has slowed since the summer amid a storm of interest rate hikes last year, but the economy has also shown signs of concern.
The big question is whether Fed Chair Jerome Powell on Wednesday afternoon will give the markets what they want to hear hints that rate hikes will end soon and it might be possible to cut rates later this year or stick to the Fed’s mantra that it plans to. to keep interest rates higher. longer, even if a mild recession occurs.
Central banks in Europe and the United Kingdom are also due to announce their latest rate hikes this week.
In addition to interest rates, more than 100 companies in the S&P 500 are set to report this week how much they made in the last three months of 2022. Among them are tech heavyweights like Apple, Amazon and parent company Google. Since these companies are three of the four largest companies on Wall Street by market capitalization, their stock movements have more of an impact on the S&P 500 than others.
Apple’s 2% drop on Monday, for example, weighed heavily on the S&P 500.
Strategists at Morgan Stanley led by Michael Wilson warn that tough times may be ahead.
“The reality is that earnings are proving worse than feared based on the data, especially as far as margins are concerned,” they wrote in a report. “Secondly, investors seem to have forgotten the cardinal rule of ‘don’t fight the Fed.’ Perhaps this week will serve as a reminder.”
Later this week, the US government will provide its latest monthly labor market update. Employment remained resilient across the broad economy, even as housing and other pillars weakened sharply under the weight of all the Fed rate hikes from last year.
Some big tech companies have announced high-level layoffs after admitting they misread their success boom coming out of the pandemic. But the job cuts may be starting to spread to other areas of the economy. Hasbro and 3M announced layoffs last week.
Economists expect Friday’s report to show that US employers added 187,500 more jobs than they cut in January. This would be a slowdown from the 223,000 hiring in December.
In energy trading, US benchmark crude fell 30 cents to $77.60 a barrel in electronic trading on the New York Mercantile Exchange. It lost $1.78 on Monday to $77.90 a barrel.
Brent crude, the international benchmark, fell 25 cents to $84.25 a barrel.
In currency trading, the US dollar fell to 130.25 yen from 130.43 yen. The price of the euro reached 1.0846 dollars from 1.0852 dollars.
HF