TOKYO (AP) – Asian shares fell on Wednesday as markets edged off a Wall Street rally and await congressional testimony by Federal Reserve Chairman Jerome Powell.
Japan’s benchmark Nikkei 225 was down 0.4% at 26,149.55. Australia’s S&P/ASX 200 closed 0.2% lower at 6,508.50. South Korea’s Kospi fell 2.7% to end at 2,342.81. Hong Kong’s Hang Seng fell nearly 2.0% to 21,132.42, while the Shanghai Composite fell 1.1% to 3,269.63.
Stocks have been slipping mostly in recent weeks as investors adjust to higher interest rates that the Federal Reserve and other central banks are increasingly drooling over to cushion record-high inflation. Investors are concerned that the Fed risks slowing economic growth and triggering a recession.
The overnight rally on Wall Street “will be taken with a pinch of salt as risks to increased inflation and growth remain,” said Mizuho Bank’s Venkateshwaran Lavanya.
The Wall Street rally, which started the holiday-shortened week, had investors eager to see what Jerome Powell would tell Congress on Wednesday, ahead of two days of testimony as part of the central bank’s semi-annual monetary policy report.
“For now, the fundamental catalyst for a more sustained rebound seems fragile,” said Yep Joon Rong, market strategist at IG in Singapore, with all eyes on Fed Chair Jerome Powell’s testimony to advance policy outlook and inflation expectations. Huh.” Vaccination.
Concerns over inflation and interest rates have been heightened by rising energy prices after Russia’s invasion of Ukraine. The price of US crude is up about 52% for the year. It has taken a big bite out of people’s wallets at the gas pump and is indicating a slowdown in spending elsewhere.
Oil prices fell on Wednesday, with benchmark US crude trading $5.44 to $104.08 a barrel. Internationally, Brent crude fell by $5.21 to $109.44 a barrel.
The long list of concerns has created an extremely turbulent market. Daily fluctuations between gains and losses have been common and major indices have sometimes shifted between sharp gains and losses on an hourly basis.
US markets remained closed on Monday for Juneteenth observation. Last week, the Fed raised its key short-term interest rate by the most since 1994, the latest effort by the central bank to slash inflation to its worst in 40 years.
The S&P 500 rose 2.4% to 3,764.79, having accounted for nearly 40% of its losses the previous week. Over 85 per cent of the benchmark index’s stocks rose. The Dow Jones Industrial Average was up 2.1% at 30,530.25 and the Nasdaq was up 2.5% at 11,069.30.
Shares of smaller companies also rose. The Russell 2000 rose 1.8% to 1,694.03.
Technology stocks had some of the strongest gains. Apple rose 3.3% and Microsoft 2.5%.
Retailers, health care companies and banks also posted solid gains. Kellogg grew 2% after the maker of Frosted Flakes and Rice Krispies said it would split into three companies. Spirit Airlines jumped 7.9% after JetBlue sweetened its buyout offer for the budget airline.
Last week, the Fed raised its key short-term interest rate to three times the normal amount. It has also begun allowing the few trillion-dollar bonds purchased through the pandemic to roll off its balance sheet. This should put upward pressure on long-term interest rates and is another way central banks are backing down markets first to bolster the economy.
The Fed’s moves are taking place as some discouraging signs about the economy have emerged, including reduced spending at retailers and souring consumer sentiment. The National Association of Realtors reported Tuesday that sales of pre-occupied US homes were slowing for the fourth month in a row. The housing market, a vital part of the economy, is slowing as homebuyers face higher prices and increasingly higher home financing costs than a year ago, following a sharp rise in mortgage rates.
The Fed may consider another such large increase at its next meeting in July, but Powell has said a three-quarters percent increase will not be common.
In currency trading, the US dollar fell from 136.64 yen to 136.33 Japanese yen. The Euro is priced at $1.0474, lower than $1.0537.
Yuri Kageyama is on Twitter