TOKYO — Asian stocks fell on Wednesday as markets ignored a Wall Street rally and awaited testimony in Congress from Federal Reserve Chairman Jerome Powell.
Japan’s benchmark Nikkei 225 lost 0.4% to end at 26,149.55. Australia’s S&P/ASX 200 fell 0.2% to 6,508.50. The South Korean Kospi fell 2.7% to 2,342.81. Hong Kong’s Hang Seng fell nearly 2.0% to 21,132.42, while the Shanghai Composite fell 1.1% to 3,269.63.
Stocks have mostly fallen in recent weeks as investors adjust to higher interest rates that the Federal Reserve and other central banks are handing out more and more to temper record inflation. Investors fear that the Fed will slow economic growth too much and cause a recession.
The overnight rally on Wall Street “will be taken with a grain of salt as high inflation and growth risks persist,” said Mizuho Bank’s Venkateswaran Lavanya.
The Wall Street rally that started the holiday-shortened week came as investors anticipate what Jerome Powell will tell Congress on Wednesday, the first of two days of testimony as part of the bank’s semi-annual monetary policy report. central.
“For now, the fundamental catalyst for a more sustained rebound appears fragile, with all eyes on Fed Chairman Jerome Powell’s testimony to further boost expectations for the policy outlook and inflation.” , Yeap Jun Rong, market strategist at IG in Singapore, said in a statement. comment.
Inflation and interest rate concerns were compounded by a spike in energy prices following Russia’s invasion of Ukraine. The price of US crude oil rose about 52% for the year. This has taken a bigger bite out of people’s wallets at the gas pump and is causing spending to slow elsewhere.
Oil prices fell on Wednesday, with benchmark U.S. crude shedding $5.44 to $104.08 a barrel. Brent crude, the international standard, fell $5.21 to $109.44 a barrel.
The persistent list of worries has created an extremely turbulent market. Daily swings between gains and losses have been common, and the major indices have occasionally swung between large gains and losses on an hourly basis.
US markets were closed on Monday for the June 19 observation. Last week, the Fed raised its main short-term interest rate to the highest since 1994, the central bank’s latest effort to rein in the worst inflation in 40 years.
The S&P 500 rose 2.4% to 3,764.79, recouping about 40% of its losses last week. More than 85% of stocks in the benchmark index gained ground. The Dow Jones Industrial Average rose 2.1% to 30,530.25 and the Nasdaq climbed 2.5% to 11,069.30.
Small company stocks also gained ground. The Russell 2000 rose 1.8% to 1,694.03.
Tech stocks have seen some of the biggest gains. Apple rose 3.3% and Microsoft 2.5%.
Retailers, healthcare companies and banks also made strong gains. Kellogg rose 2% after the maker of Frosted Flakes and Rice Krispies announced it would split into three companies. Spirit Airlines jumped 7.9% after JetBlue softened its bid for the low-cost airline.
Last week, the Fed raised its main short-term interest rate to three times the usual amount. It also just started allowing some of the trillions of dollars of bonds it bought during the pandemic to come off its balance sheet. This should put upward pressure on longer-term interest rates and is another way for central banks to withdraw previously buoyant supports under the markets to support the economy.
The Fed’s moves come as some discouraging signals have emerged about the economy, including lower spending at retailers and gloomy consumer sentiment. The National Association of Realtors reported on Tuesday that sales of previously occupied U.S. homes have slowed for the fourth consecutive month. The housing market, a crucial part of the economy, is slowing as home buyers face record prices and significantly higher financing costs than a year ago following a rapid rise mortgage rates.
The Fed could consider another such mega-hike at its next meeting in July, but Powell said increases of three-quarters of a percentage point would not be common.
In currency trading, the US dollar fell slightly to 136.33 Japanese yen from 136.64 yen. The euro traded at $1.0474, down from $1.0537.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama