TOKYO — Asian shares mostly declined Thursday amid concerns about the impact of China’s “zero-COVID” strategy mixed with hopes for economic activity and tourism returning to normal.
Japan’s benchmark Nikkei 225
NIK,
shed 0.4% in morning trading. Australia’s S&P/ASX 200
XJO,
gained 0.1%, after government data showed that the employment situation had improved in October from September.
South Korea’s Kospi
180721,
slipped 1%. Hong Kong’s Hang Seng
HSI,
dropped 2.6%, while the Shanghai Composite
SHCOMP,
fell 0.8%. Stocks rose in Singapore
STI,
but fell in Taiwan
Y9999,
Malaysia
FBMKLCI,
and Indonesia
JAKIDX,
China is maintaining its “zero-COVID” approach of mass testing many people alongside localized lockdowns and quarantines to eliminate the coronavirus entirely. Such restrictions have caused a supply crunch for some of Asia’s biggest manufacturers, denting economic growth.
Elsewhere, the lifting of pandemic restrictions have fueled hopes of greater consumer spending and tourism revenue.
Market watchers noted worries about how the Federal Reserve might not ease on its aggressive interest rate hikes, which are aimed at curbing inflation pressures. Much of the market’s prior rally on Wall Street was due to such hopes, including easing inflation.
“Markets are still unconvinced that the U.S. Fed will opt for lower magnitude rate hikes as incoming data sent mixed signals,” said Venkateswara Lavanya at Mizuho Bank.
U.S. retail data has shown improvement, while industrial production has dropped, highlighting the resilience of the service sector, as opposed to weakening external demand.
The Fed has been raising interest rates in an effort to slow the economy and tame the hottest inflation in decades. Wall Street has been worried it could hit the brakes too hard and bring on a recession.
On Wall Street, retailers and technology companies led a broad slide. The S&P 500
SPX,
fell 0.8%, wiping out most of its gains from a day earlier. The Dow Jones Industrial Average
DJIA,
fell 0.1% and the Nasdaq
COMP,
lost 1.5%.
The latest government report on retail sales for October shows that consumer spending remains strong, though it’s unclear whether that’s because of more purchases or higher prices.
Strong consumer spending is typically a good sign for the economy, but it could make the Fed’s strategy of cooling the economy more difficult.
“The better-than-expected retail sales results don’t bolster the case that the Fed” can ease up on its campaign to slow the economy with high interest rates, said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management.
He said resilient consumer spending could improve the possibility that the Fed manages to pull off a so-called “soft landing” with its strategy. That would involve taming inflation without throwing the economy into a recession, or at least avoiding a damaging recession.
Bond yields were mixed. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.69% from 3.78% from late Tuesday. The yield on the two-year Treasury rose to 4.37% from 4.35% from late Tuesday.
Also hanging over market sentiments, especially the energy sector, is the war in Ukraine. Any worsening could cause spikes in prices for oil, gas and other commodities that the region produces.
In energy trading, benchmark U.S. crude
CLZ22,
lost 67 cents to $84.92 a barrel. U.S. crude oil prices initially rose, before settling 1.5% lower Wednesday. Brent crude
BRNF23,
the international standard, fell 62 cents to $92.24 a barrel.
In currency trading, the U.S. dollar
USDJPY,
inched down to 139.47 Japanese yen from 139.51 yen.
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