Asian shares slip lower following broad decline on Wall St

Tokyo, Sept. 19 (BNA): Asian stocks fell on Monday after another week of heavy losses on Wall Street, as investors braced for another rate hike by the US Federal Reserve.

Japanese markets were closed for a holiday. Oil prices rose while US futures fell.

On Friday, FedEx’s stark warning Friday about rapidly deteriorating trends in the economy gave investors more to worry about. The S&P 500 fell 0.7%, while the Nasdaq lost nearly 1%. Dow lost nearly half a percent, according to the Associated Press (AP).

Markets have been on alert due to stubbornly high inflation and the interest rate increases used to fight it. The fear is that the Federal Reserve and other central banks may exceed their policy goals, leading to a recession.

Most economists expect the Fed to raise the key lending rate by another three-quarters of a point when central bank leaders meet this week.

“The truth is that optimistic forecasts based on US inflation data ‘hot under the hood’ means that markets have good reason to prepare for headwinds amid prospects of higher interest rates (for a longer period); the US dollar is arguably ‘higher for longer’.” Vishnu Varathan of Mizuho Bank said in a comment.

The S&P 500 fell 4.8% over the course of the week, with much of the loss coming from Tuesday’s 4.3% decline after a surprisingly hot report on inflation.

All major indices have now posted losses in four of the past five weeks.

In Asia on Monday, Hong Kong’s Hang Seng lost 0.9% to 18,586.47 while the Shanghai Composite fell 0.3% to 3115.87. Australia’s S&P/ASX 200 fell 0.1% to 6,731.80. In Seoul, Kospi sank 1% to 2,360.22.

The Bank of Japan meets on Wednesday and Thursday amid mounting pressure to counter the sharp decline in the yen, which is trading near 145 against the dollar after sharp increases in the dollar’s value. This has raised costs for businesses and consumers, who have to pay more for imports of oil, gas and other necessities.

However, the Bank of Japan has so far held steady in maintaining a very low reference rate at 0.1% in hopes of stimulating investment and spending.

FedEx sank 21.4% in its largest single-day sale ever Friday after warning investors that fiscal first-quarter earnings are likely to fall short of expectations due to a downturn in business. The parcel delivery service is also closing storefronts and corporate offices and expects to further weaken business conditions.

The S&P 500 fell 0.7% to 3,873.33. It’s now down 18.7% so far this year. The Dow Jones Industrial Average fell 0.5% to 30822.42 and the Nasdaq fell 0.9% to 11,448.40.

Makers of household goods, which are usually considered less risky investments, have held up better than the rest of the market. Campbell Soap shares rose 1.3 percent.

Higher interest rates tend to weigh on stocks, especially the more expensive technology sector. Technology shares in the S&P 500 are down more than 26% for the year and telecoms companies are down more than 34%. These are the worst performing sectors in the benchmark index so far this year.

The housing sector is also hurting as interest rates rise. Average long-term mortgage rates in the US rose above 6% this week for the first time since the housing crash in 2008. The higher rates could make an already tight housing market more expensive for homebuyers.

Reports from the government this week showed that prices for almost everything except gas are still rising, the labor market remains overheated and consumers continue to spend, all of which provide ammunition for Federal Reserve officials who say the economy can withstand further price hikes.

In other trading on Monday, the benchmark US crude price rose 58 cents to $85.69 a barrel in electronic trading on the New York Mercantile Exchange. It rose 1 cent to $85.11 a barrel.

Brent crude rose 72 cents to $92.07 a barrel.

The dollar rose to 143.14 yen from 142.94 yen. The euro fell to 99.98 cents from $1.0014.

HF