Wednesday December 7th, 2022 12:22PM

Asian shares sink after inflation-driven retreat on Wall St

By The Associated Press
Related Articles
  Contact Editor

BANGKOK (AP) — Shares sank in Asia on Monday after a report that U.S. inflation worsened last month sent stocks reeling on Wall Street.

Major regional markets dropped more than 2% in early trading Monday, while U.S. futures slipped more than 1%. On Friday, the S&P 500 sank 2.9%, locking in its ninth losing week in the last 10.

Investors had hoped the highly anticipated consumer price report would show the worst inflation in generations had slowed a touch last month, passing its peak. Instead, the U.S. government said inflation accelerated to 8.6% in May from 8.3% the month before.

Investors took Friday's report to suggest the Federal Reserve will persist in raising interest rates and making other moves in order to slow the economy, to try to force down inflation.

Tokyo's Nikkei 225 index lost 2.6% to 27,018.01 and the Hang Seng in Hong Kong skidded 3% to 21,145.27. In South Korea, the Kospi declined 3.18% to 2,516.95 as a truckers strike raised concern over supply chain disruptions. The Shanghai Composite index dropped 1% to 3,253.04.

Thailand's benchmark fell 1.4%, and markets in Australia were closed for a holiday.

Regional concerns have also been weighing on sentiment, as China combats more outbreaks of coronavirus after easing some precautions in recent weeks.

That means “previous optimism surrounding China’s reopening may also take a pause, as the resumption of mass-testing in Beijing and Shanghai seems to place Covid-19 risks at the forefront once again," Jun Rong Yeap of IG said in a commentary.

On Friday, the S&P 500 shed 117 points to 3,900.86 and tumbling bond prices sent Treasury yields to their highest levels in years. The Dow Jones Industrial Average lost 2.7% to 31,392.79, and the Nasdaq composite dropped 3.5% to 11,340.02.

The growing expectation is for the Fed to raise its key short-term interest rate by half a percentage point at each of its next three meetings, beginning next week. Only once since 2000 has the Fed raised rates by that much, last month.

Surging prices and expectations about Fed policy have sent the two-year Treasury yield to its highest level since 2008 and the S&P 500 down 18.7% from its record set in early January. High-growth technology stocks, cryptocurrencies and other big winners of the pandemic's earlier days have been hurting the most, but the damage is broadening as retailers and others warn about upcoming profits.

Record-low interest rates engineered by the Fed and other central banks have helped keep investment prices high. Now the “easy mode” for investors is being switched off. Since higher interest rates make borrowing more expensive, dragging on spending and investments by households and companies, there also is a risk the Fed could push the U.S. economy into a recession.

Investors also worry food and fuel costs may keep surging, regardless of how aggressively the Fed moves, partly because of the crisis in Ukraine, which is a major breadbasket for the world.

Another report Friday showed consumer sentiment worsening more than economists expected. Much of the souring in the University of Michigan's preliminary reading was due to higher gasoline prices.

On Saturday, the national average for a gallon of regular gas surpassed $5, by a fraction of a penny, according to the AAA auto club.

That adds to several recent profit warnings from retailers indicating U.S. shoppers are slowing or at least changing their spending because of inflation. Such spending is the heart of the U.S. economy.

The two-year Treasury yield zoomed to 3.05% following the inflation report from 2.83% late Thursday, a big move for the bond market.

The 10-year yield was also up, but by less. It rose to 3.17% as of early Monday, up from 3.15% Friday and 3.04% on Thursday. That's its highest level since 2018.

The narrowing gap between those two yields is a signal that investors in the bond market are more concerned about economic growth. Usually, the gap is wide, with 10-year yields higher because they require investors lock away their dollars for longer.

A two-year yield higher than the 10-year yield would be a signal to some investors that a recession may hit in a year or two.

In other trading, benchmark U.S. crude oil lost $1.83 to $118.84 per barrel in electronic trading on the New York Mercantile Exchange. It lost 84 cents to $120.67 on Friday.

Brent crude, the pricing standard for international trading, gave up $1.75 to $120.26 per barrel.

The dollar rose to 134.81 Japanese yen from 134.37 yen. It briefly topped 135 yen. The euro fell to $1.0493 from $1.0518.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services
© Copyright 2022
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Asian shares sink after inflation-driven retreat on Wall St
Shares are lower in Asia after benchmarks on Wall Street tumbled on with a report that U.S. inflation worsened last month
11:01PM ( 10 minutes ago )
Tonys Latest | Joaquina Kalukango wins lead musical actress
Joaquina Kalukango has won the Tony Award for best leading actress in a musical
10:51PM ( 20 minutes ago )
Tonys Latest | Myles Frost dances off with lead actor crown
Myles Frost has moonwalked away with the award for best lead actor in a musical for playing Michael Jackson and becomes the youngest solo winner in that category
10:47PM ( 24 minutes ago )
Associated Press (AP)
NATO chief: Turkey has 'legitimate concerns' over terrorism
NATO Secretary-General Jens Stoltenberg says Turkey has “legitimate concerns” over terrorism and other issues that need to be taken seriously
8:40PM ( 2 hours ago )
US: Pfizer COVID-19 appears effective for kids under 5
A review by federal health officials says that Pfizer's COVID-19 vaccine appears safe and effective for children under 5, the only group not currently eligible for vaccination
8:00PM ( 3 hours ago )
French projections: Macron's centrists will keep a majority
French President Emmanuel Macron’s centrist alliance is expected to keep its parliamentary majority after the first round of voting Sunday, but will likely have far fewer seats than five years ago
5:51PM ( 5 hours ago )
AP Business
WTO chief sees 'bumpy' road as ministers work to reach deals
The head of the World Trade Organization is predicting a “bumpy and rocky" road as the international trade body opens its highest-level meeting in 4-1/2 years
8:34AM ( 14 hours ago )
The AP Interview: Sri Lanka PM says he's open to Russian oil
Sri Lanka’s prime minister says he may be compelled to buy more oil from Russia as he hunts desperately for fuel to keep the country running
7:28AM ( 15 hours ago )
Several factors are converging to push gas prices higher
Gas prices are hitting $5 a gallon, and they're showing no signs of letting up
2:21PM ( 1 day ago )
AP Business - Economy
Stocks fall sharply on Wall Street after inflation worsens
Stocks on Wall Street fell sharply Friday after getting hammered by data showing inflation is getting worse, not better, as investors had been hoping
10:48AM ( 2 days ago )
Hot reading on inflation sends stocks lower on Wall Street
Stocks are sinking on Wall Street and Treasury yields are moving sharply higher as markets shudder after another hot reading on inflation
9:43AM ( 2 days ago )
Russia's central bank cuts interest rates to prewar level
Russia’s central bank has cut interest rates back to their prewar levels
9:08AM ( 2 days ago )
AP Business - Financial Markets
Average US gasoline price jumps 39 cents to $5.10 per gallon
The average U.S. price of regular-grade gasoline spiked 39 cents over the past three weeks to $5.10 per gallon
12:29PM ( 10 hours ago )
Ukraine: Russia said to be using more deadly weapons in war
Ukrainian and British officials have warned that Russian forces are relying on weapons with potential to cause mass casualties as they try to make headway in capturing eastern Ukraine
10:10PM ( 1 day ago )
Biden ramps up federal help for New Mexico wildfire fight
President Joe Biden says he is escalating federal assistance for New Mexico as it faces its largest wildfire in recorded state history
8:08PM ( 1 day ago )
AP Business - Industries
US inflation hit a new 40-year high last month of 8.6%
The prices of gas, food and most other goods and services jumped in May, raising inflation to a new four-decade high and giving American households no respite from rising costs
10:57AM ( 2 days ago )
Asian shares mixed after rate jitters tumble on Wall Street
Shares are mostly lower in Asia, with only Shanghai rising, after stocks tumbled on Wall Street on expectations central banks will focus on battling inflation with interest rate hikes
12:50AM ( 2 days ago )
Stocks tumble as rate pressures grow, inflation report looms
Stocks on Wall Street tumbled Thursday following the latest reminder that central banks now care more about fighting inflation than propping up markets
4:43PM ( 3 days ago )
AP Business - Financial Services
Tonys Latest | Joaquina Kalukango wins lead musical actress
Joaquina Kalukango has won the Tony Award for best leading actress in a musical
10:51PM ( 21 minutes ago )
Tonys Latest | Myles Frost dances off with lead actor crown
Myles Frost has moonwalked away with the award for best lead actor in a musical for playing Michael Jackson and becomes the youngest solo winner in that category
10:47PM ( 24 minutes ago )
Tonys Latest | Deirdre O’Connell wins best actress in a play
Deirdre O’Connell has won the Tony Award for best actress in a play for her work in “Dana H.”
10:35PM ( 36 minutes ago )
'Company,' 'The Lehman Trilogy' winning big at Tony Awards
A gender-swapped revival of Stephen Sondheim’s “Company” rode the fondness Broadway has for the late iconic composer by earning five statuettes, including best musical revival
10:24PM ( 48 minutes ago )
Tonys Latest | ‘The Lehman Trilogy’ is money with play win
“The Lehman Trilogy,” which tells the story of an American financial giant’s downfall, has won best new play honors at the Tonys
10:17PM ( 54 minutes ago )