TOKYO (AP) — Asian stocks fell mostly Tuesday as investors awaited interest rate decisions and earnings reports from around the world.
Traders awaited the decision of the US Federal Reserve. decision on interest rates, scheduled for Wednesday. They are also keeping an eye on indicators of the Chinese economy, the region’s key driver of growth.
Japan’s benchmark Nikkei 225 index 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 decreased 0.4% to 2,440.25. Hong Kong’s Hang Seng lost 0.3% to 22,011.37, while the Shanghai Composite lost 0.2% to 3,262.62.
“China’s swift reopening has boosted its domestic growth outlook, Europe’s mild weather has sharply reduced its risk of recession and a string of better inflation news has raised hopes that the Fed can engineer a ‘soft landing’ in the US,” he said. Stephen Innes, Managing Partner at SPI Asset Management.
“Despite these changes, the risk of a US recession remains a major concern and may be the most important risk to the global cyclical outlook,” he said.
Stocks fell Monday on Wall Street. The S&P 500 fell 1.3% to 4,017.77, repaying some of the gains that had pushed it to its highest level since early December last week. The Dow Jones Industrial Average fell 0.8% to 33,717.09, while the Nasdaq Composite sank 2% to 1,393.81.
Markets have been sidetracked recently on concerns that the economy and corporate profits could take a sharp decline, along with conflicting hopes that cooling inflation will cause the Federal Reserve to take it easy on interest rates.
The central bank’s next rate decision will come on Wednesday and most investors expect it to announce a rise of just 0.25 percentage point. That would be the smallest increase since March, after a series of 0.75 point increases and then a 0.50 point increase, and would mean less additional pressure on the economy.
Higher rates fight inflation by intentionally slowing the economy while lowering investment prices. Inflation has been cooling since the summer amid last year’s blizzard of rate hikes, but the economy has also shown signs of concern.
The big question is whether Fed Chairman Jerome Powell will give markets what they want to hear on Wednesday afternoon: hints that rate hikes will end soon and that late-year rate cuts might even be possible. this year, or whether it will stick to the Fed’s mantra that it plans to keep rates higher for longer, even if a modest recession hits.
The central banks of Europe and the United Kingdom will also announce their latest rate hikes this week.
Beyond interest rates, more than 100 S&P 500 companies are scheduled to report earnings this week for the last three months of 2022. Among them are tech heavyweights Apple, Amazon and Google’s parent company. Because these companies are three of the four largest on Wall Street by market value, their stock movements influence the S&P 500 far more than others.
Apple’s 2% drop on Monday, for example, was the biggest weight on the S&P 500.
Morgan Stanley strategists led by Michael Wilson warn that tougher times are ahead.
“The reality is that earnings are proving to be even worse than feared based on the data, especially when it comes to margins,” they wrote in a report. “Second, investors seem to have forgotten the cardinal rule of ‘Don’t fight the Federal Reserve.’ Perhaps this week will serve as a reminder.”
Later this week, the US government will also give its latest monthly job market update. Hiring has remained resilient across the broader economy, even as housing and other corners weaken considerably under the weight of all the Fed rate hikes since last year.
Some big tech companies have announced high-profile layoffs after acknowledging that they misread their boom as a result of the pandemic. But the job cuts may be beginning to spill over into 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. That would be a slowdown from December’s hiring of 223,000.
In energy trading, benchmark US crude fell 30 cents to $77.60 a barrel in electronic trading on the New York Mercantile Exchange. On Monday it was down $1.78 to $77.90 a barrel.
Brent crude, the international standard, fell 25 cents to $84.25 a barrel.
In currency trading, the US dollar inched down to 130.25 Japanese yen from 130.43 yen. The euro cost $1.0846 from $1.0852.
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AP business writer Stan Choe contributed.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
