BEIJING (`) – Asian stock markets fell on Thursday after the Federal Reserve said its economists expect a “mild recession” this year.
Shanghai, Hong Kong, Seoul and Sydney withdrew. Tokyo advanced. Oil prices fell.
Wall Street closed lower on Wednesday after notes from the central bank’s last meeting said their economists expect less bank lending to cause a “mild recession.” Traders were already seeing a growing likelihood of at least a brief US recession this year following rate hikes to cool inflation. Government data showed consumer prices rose 5% in March, well above the Fed’s 2% target.
“It appears to be stoking recession fears that have shaken risk appetite,” IG’s Yeap Jun Rong said in a report. The Fed report “undermines the talk of a soft-landing scenario.”
The Shanghai Composite Index slipped 0.4% to 3,312.79, while Tokyo’s Nikkei 225 was up 0.2% to 28,140.27. Hong Kong’s Hang Seng was down 0.7% to 20,160.84.
Seoul’s Kospi slipped 0.1% to 2,548.61, while Sydney’s S&P ASX fell 0.4% to 7,313.90.
India’s Sensex opened up 0.4% to 60,149.89. New Zealand and Singapore advanced while Jakarta retreated.
Traders have worried that the Fed and other central banks in Europe and Asia could plunge the global economy into recession as they try to wipe out inflation, which is near multi-decade highs.
Those concerns were briefly overshadowed by concerns about the health of global banks after two high-profile bankruptcies in the United States and one in Switzerland. But regulators appear to have allayed those concerns by promising more lending and other steps if needed to stabilize banks.
On Wall Street, the benchmark S&P 500 index fell 16.99, or 0.4%, to 4,091.95. About 65% of stocks in the index fell.
The Dow Jones Industrial Average slipped 38.29, or 0.1%, to 33,646.50. The Nasdaq Composite lost 102.54, or 0.9%, to 11,929.34.
According to data from CME Group, traders are still largely betting that the Fed will hike short-term rates by another quarter of a point at its next meeting. They have shaded some bets on the possibility that the Fed will merely hold rates steady in May, which it hasn’t done in more than a year.
Traders have placed bets that the Fed will have to cut interest rates later this year to prop up the economy.
The bond market is nervous about a possible recession. The 10-year government bond yield slipped to 3.41% from 3.43% late Tuesday. The two-year Treasury yield, which is more in line with expectations for the Fed, fell to 3.96% from 4.03%.
Investors are looking forward to the latest quarterly earnings reports that US companies are due to release this week.
Expectations are low. Analysts are forecasting the worst fall in S&P 500 earnings per share since the pandemic crushed the economy in 2020. However, many also expect this to mark the bottom and are calling for a return to growth later this year.
In energy markets, the benchmark US crude oil lost 32 cents to $82.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.73 to $83.26 on Wednesday. Brent crude, the price basis for international oil trading, fell 40 cents to $86.93 a barrel in London. In the previous session, it rose $1.72 to $87.33.
The dollar rose to 133.35 yen from 133.19 yen on Wednesday. The dollar fell from $1.0995 to $1.0986.
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