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Asian benchmarks fell mostly on Thursday after Wall Street stocks fell and investors braced for a much-anticipated inflation report from the US.
Later in the day, the US government will release its monthly update on inflation experienced by consumers. Economists expect an acceleration to 3.3% in July from 3% in June. Tina Teng, market analyst at CMC Markets, called the upcoming update “a pivotal event for global markets.”
Inflation in China also remains a major problem. “A slowdown in consumer spending and high interest rates remain problems for the global economy,” Teng said.
Japan’s benchmark Nikkei 225 gained 0.8% to close at 32,473.65. Australia’s S&P/ASX 200 rose 0.3% to 7,357.40. South Korea’s kospi slipped 0.3% to 2,596.62. Hong Kong’s Hang Seng slipped 0.2% to 19,208.28, while the Shanghai Composite rose 0.3% to 3,253.08.
On Wall Street, the S&P 500 fell 31.67, or 0.7%, to 4,467.71, marking its sixth decline in seven days. The Dow Jones Industrial Average was down 191.13, or 0.5%, to 35,123.36 and the Nasdaq Composite was down 162.31, or 1.2%, to 13,722.02, with big tech stocks leading the declines.
Stocks have cooled off in August since rising 19.5% for the first seven months of the year. There are several reasons for the small drop, including criticism that Wall Street was too quick to reach a consensus that inflation will continue to cool, the economy will continue to grow and that the Federal Reserve has already completed its rate hikes.
Economists say the latest improvement to bring inflation down to the Fed’s 2 percent target could be the hardest part. Fed officials have repeatedly stated that their forthcoming rate decisions will depend on the latest economic data, particularly inflation and jobs.
“As risks become more two-sided, Fed officials are beginning to shift focus to how long they can keep rates stable at sufficiently restrictive levels,” said economists at Deutsche Bank.
A much stronger-than-expected rise in inflation could raise concerns that the Fed’s job of fighting inflation is far from over and that it may have to raise interest rates further. At the very least, it could persuade the Fed to keep interest rates high for longer than expected.
High interest rates slow inflation by weakening the overall economy and weighing on investment prices. The Fed has already cut interest rates to their highest level in more than two decades. Historically, rate hikes have taken a long time to have their full impact throughout the economy, so the risk of a recession remains.
Meanwhile, companies continue to offer spring earnings reports that are mostly better than analysts expected, including Axon Enterprise — the company behind Tasers and Axon body cameras — and Akamai Technologies.
Nvidia was the largest weight in the S&P 500, down 4.7%. The chipmaker is among stocks that have soared this year on Wall Street’s hype surrounding artificial intelligence technology, raising concerns that they went too far.
Other big tech stocks also fell, and their movements have a larger impact on the S&P 500 because of their sheer size. Amazon fell 1.5%, Microsoft fell 1.2%, and Tesla lost 3%. The threat of high interest rates tends to hit technology and other high-growth stocks hardest.
In the bond market, the yield on the 10-year government bond fell from 4.03% to 4.00% late Tuesday. This rate of return helps set interest rates on mortgages and other loans.
The two-year Treasury yield, which is more in line with expectations of Fed action, rose to 4.80% from 4.76%.
In energy trading, the reference price for US crude rose 26 cents to $84.66 a barrel. Brent crude, the international standard, rose 24 cents to $87.79 a barrel.
In forex trading, the US dollar rose to 143.99 Japanese yen from 143.67 yen. The euro was trading at $1.0995, down slightly from $1.0979.
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` business writer Stan Choe contributed from New York.
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