TOKYO – Asian shares were trading mostly lower Thursday as investors turned their attention to upcoming earnings reports and other economic indicators.
Japan's benchmark Nikkei 225 shed 1.3% in afternoon trading to 27,439.88. Australia's S&P/ASX 200 slipped 0.4% to 7,208.10. South Korea's Kospi fell 1.4% to 2,461.12. Hong Kong's Hang Seng lost 0.4% to 20,204.33. The Shanghai Composite slipped less than 0.1% to 3,311.55.
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While efforts to cool inflation by raising interest rates are designed to slow overheated economies, the worry is that central bank policymakers might overdo it, leading to recession.
Many regional economies are seeing weakness in exports due to softer demand in major markets like the United States. That has dulled the impact of a rebound in China as its economy recovers from pandemic-related disruptions.
Stocks on Wall Street mostly slipped Wednesday following the latest signals that the U.S. economy is slowing under the weight of much higher interest rates.
“Wall Street is realizing that you need a strong economy to keep stocks heading higher,” Edward Moya of Oanda said in a commentary. “The US economy is clearly in slowdown mode and expectations should be for further labor market weakness.”
The S&P 500 dipped 0.2% to 4,090.38 and the Dow Jones Industrial Average rose 0.2% to 33,482.72. But the Nasdaq composite dropped 1.1% to 11,996.86.
One report from the Institute for Supply Management said that growth in the U.S. services sector slowed last month by more than economists expected, as the pace of new orders cooled. A separate report suggested private employers added 145,000 jobs in March, down sharply from February's 261,000. Perhaps more importantly for markets, pay raises also weakened for workers, according to the ADP Research Institute.
ADP’s private payroll report could offer a preview of what Friday’s more comprehensive jobs report from the U.S. government will show. Economists expect it to say employers added 240,000 jobs last month, down from 311,000 in February.
If the job market really is slowing from the strong growth that's helped to prop up the larger economy recently, it could offer the Fed reason to pause on its hikes to interest rates.
That’s a big deal for markets not only because it could lessen the odds of an upcoming recession, which some economists already see as a high probability. Higher rates also drag on prices for stocks, bonds and other investments.
Other reports on the economy this week also came in weaker than expected, including readings on the number of job openings across the country and the health of the manufacturing sector.
The reports have traders increasing bets for the Fed to hold rates steady at its next meeting in May, which would be the first time that’s happened in more than a year. Many traders are also betting the Fed will have to cut rates later this year, something that can act like steroids for markets.
The Fed, though, has consistently said it doesn’t expect to cut rates this year.
On the winning side Wednesday was Johnson & Johnson, which rose 4.5% after it proposed to pay nearly $9 billion to cover allegations that its baby powder containing talc caused cancer. It was one of the biggest drivers of the Dow Jones Industrial Average's gain for Wednesday.
In the bond market, the yield on the 10-year Treasury dipped to 3.30% from 3.34% late Tuesday. It helps set rates for mortgages and other loans. The two-year yield, which tends to move more on expectations for the Fed, slipped to 3.80% from 3.82%.
Gold held relatively steady and dipped $2.60 to settle at $2,035.60 per ounce. It’s up more than 11% amid worries about the strength of the global banking system.
In other trading, benchmark U.S. crude fell 58 cents to $80.03 a barrel in electronic trading on the New York Mercantile Exchange. It lost 10 cents to $80.61 on Wednesday. Brent crude, the international standard, fell 56 cents to $84.43 a barrel.
The U.S. dollar inched down to 131.24 Japanese yen from 131.30 yen. The euro cost $1.0896, down from $1.0908.