TOKYO (`) – Asian stocks were mixed on Tuesday as some markets were closed or anticipating a holiday and investors showed muted reactions to the recent historic US banking collapse.
Japan’s Nikkei 225 rose 0.2% to 29,175.44 in morning trade. Trading in Tokyo will remain closed for the rest of the week for Golden Week holidays. Trading in Shanghai was closed on Labor Day.
Australia’s S&P/ASX 200 fell 0.2% to 7,319.40. South Korea’s Kospi was up 0.8% to 2,522.09. Hong Kong’s Hang Seng was little changed at 19,885.48.
The Reserve Bank of Australia held a policy meeting but no change was expected. Economic and inflation reports are also expected in Europe ahead of the central bank meeting later in the week.
The markets are also preparing for what will hopefully be the last rate hike by the US Federal Reserve for a long time. Oil prices and currencies have hardly changed.
The latest Chinese manufacturing data showed a fall, which analysts said reflects how the flagging export market is starting to hurt the domestic economy.
“We believe the government will resume subsidies for electric vehicles, which would benefit both manufacturing and service sectors. The government could also speed up infrastructure construction,” Robert Carnell and other analysts at ING said in their report.
On Wall Street, the S&P 500 was little changed after regulators seized First Republic Bank and sold most of it in hopes of preventing further turmoil in the industry. It fell 1.61, or less than 0.1%, to 4,167.87. The Dow Jones Industrial Average fell 46.46, or 0.1%, to 34,051.70 and the Nasdaq Composite fell 13.99, or 0.1%, to 12,212.60.
It has been feared that First Republic will be next to collapse after the collapse of Silicon Valley Bank and Signature Bank in March. That fueled a greater concern that runs on small and mid-sized banks could shut down the economy, as the financial industry woes did in 2008.
But analysts and economists see big differences between then and now. The largest US banks are now feeling less pressure and several banks under scrutiny said their deposit levels have risen since late March. And the stock market’s reaction suggests that investors are viewing First Republic Bank, which plunged 75% last week, as an isolated rather than a systemic problem.
Shares of JPMorgan Chase, which buys much of First Republic’s assets, rose 2.1%. After the deal, it gets even bigger.
Still, there are many other issues hanging around Wall Street that could shake things up. These include concerns about corporate profits and the US government’s recent dispute over the country’s debt limit.
First of all, this is what the Federal Reserve will do with interest rates. At its next meeting, which concludes Wednesday, most traders expect the Fed to hike short-term rates another quarter of a point to a range of 5% to 5.25% from practically zero early last year.
The hope is that this may be the last hike for a while, which would give the economy and financial markets more breathing room.
The Fed has hiked interest rates sharply in hopes of bringing high inflation under control. But high interest rates are a notoriously blunt tool that slows down the entire economy, increases the risk of a recession and hurts investment prices.
If banks cut lending after their industry’s recent struggles, even if there are no more defaults, that could itself act like rate hikes. Many investors are bracing for a recession that will hit later this year.
A report on Monday from the Institute for Supply Management said manufacturing activity contracted again in April, although not as much as most economists had expected. Other reports this week will provide the latest updates on the US services industry and hiring across the economy.
One lever that has supported Wall Street in recent weeks has been a slew of companies reporting better-than-expected earnings for the first three months of the year.
As of last week, when just over half of S&P 500 companies were reporting, nearly four out of five had higher than forecast earnings, according to FactSet. That puts the companies in the index on track to report a 3.7% year-over-year decline.
That would be a second straight quarter of falling earnings in what Wall Street is calling an earnings recession. But it wouldn’t be as bad as the 6.7% drop analysts forecast a month ago.
In the bond market, government bond yields rose as Wall Street expectations for at least one more rate hike solidified. The yield on the 10-year government bond rose to 3.58% from 3.43% late Friday. It helps set interest rates on mortgages and other major loans.
The US two-year Treasury yield, which is more in line with Fed expectations, rose to 4.13% from 4.02%.
In energy trading, the reference price for US crude fell 3 cents to $75.63 a barrel. Brent crude, the international standard, fell 3 cents to $79.28 a barrel.
In forex trading, the US dollar fell from 137.47 yen to 137.42 Japanese yen. The euro stood at $1.0988, up slightly from $1.0978.
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` Business Writer Stan Choe contributed.
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