Shares fall in Tokyo, Hong Kong, Seoul
BANGKOK — Shares declined in Asia on Friday after a retreat on Wall Street driven by fears that strong economic data will lead the Federal Reserve to double down on its interest rate hikes to tame inflation.
U.S. futures ES00 YM00 edged higher and oil prices rose. Trading was winding down with the approach of Christmas and New Year holidays.
Japan reported its core inflation rate, excluding volatile fresh foods, rose to 3.7% in November, the highest level since 1981, as surging costs for oil and other commodities added to upward price pressures in the world’s third-largest economy.
While the rate was much lower than in the U.S. and most major European and emerging economies, it adds to pressure on the Bank of Japan to adjust its own policies that have kept interest rates ultra-low to spur growth. For Japan, deflation — falling prices — rather than inflation has been the key concern for most of the past few decades. Recession in coming months remains the greater concern, economists say.
“Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of Japan’s 2% target by mid-2023,” Capital Economics economist Marcel Thieliant said in a report.
The Fed has already hiked its key overnight rate to its highest level in 15 years. It began the year at a record low of near zero. Many economists and investors expect a recession to hit the U.S. economy in 2023.
Tokyo’s Nikkei 225 index JP:NIK lost 0.9% and the Hang Seng HK:HSI in Hong Kong shed 0.5%. The Shanghai Composite index CN:SHCOMP was unchanged, and Australia’s S&P/ASX 200 AU:XJO declined 0.7%.
In Seoul, the Kospi KR:180721 dropped 1.4%. Shares also fell in Singapore SG:STI, Indonesia ID:JAKIDX and Taiwan TW:Y9999.
Good economic data should be positive for markets when recession may be looming, but the reports Thursday suggested the Federal Reserve may need to keep hiking interest rates and keep them high to curb inflation.
The Fed is particularly worried about a still-strong job market giving more oxygen to inflation, which has eased a bit in recent months but is still near the highest level in decades. A report Thursday said employers laid off fewer workers last week than expected. Another report showed that the broad U.S. economy expanded at a more robust pace during the summer than earlier estimated.
The S&P 500 SPX fell 1.4% on Thursday after having been down as much as 2.9% earlier in the day. It closed at 3,822.39. The pullback brings Wall Street’s main measure of health back to a loss of nearly 20% for the year.
The Dow Jones Industrial Average DJIA fell 1% to 33,027.49 and the Nasdaq COMP closed 2.2% lower, at 10,476.12.
Trading has been topsy-turvy across Wall Street recently as reports paint a mixed portrait of the economy.
In other trading Friday, U.S. benchmark crude CLG23 oil rose 79 cents to $78.28 per barrel in electronic trading on the New York Mercantile Exchange. It fell 80 cents to $77.49 per barrel on Thursday.
Brent crude oil BRNG23, the pricing basis for international trading, advanced 47 cents to $82.14 per barrel.
The U.S. dollar USDJPY rose to 132.64 Japanese yen from 132.38 yen.