Asian stocks mixed after Wall St plunges on US recession warning

By JOE McDONALD (AP Business Writer)

BEIJING (AP) — Asian stock markets posted mixed results Thursday after the Federal Reserve said its economists expect a “mild recession” this year.

Shanghai and Hong Kong fell back while Tokyo and Seoul advanced. Oil prices fell.

Wall Street closed lower on Wednesday after the US government reported that inflation is still higher than the Fed’s target and notes from the latest central bank meeting said its economists expect the reduction of loans causes a “mild recession”. Traders already saw an increasing probability of at least a brief US recession this year following interest rate hikes to cool inflation.

“Recession fears seem to be emerging that have shaken risk sentiments,” IG’s Yeap Jun Rong said in a report. The Fed report “erodes talks of a soft landing scenario.”

The Shanghai Composite Index lost 0.1% to 3,324.30 while Tokyo’s Nikkei 225 added 0.1% to 28,108.67. Hong Kong’s Hang Seng fell 0.9% to 20,125.48.

Seoul’s Kospi gained 0.1% to 2,554.19 while Sydney’s S&P ASX lost 0.2% to 7,325.70. The New Zealand and Southeast Asian markets declined.

Traders have been concerned that the Fed and other central banks in Europe and Asia could push the global economy into recession as they try to extinguish inflation that is near multi-decade highs.

That anxiety was briefly drowned out by fears about the health of the global financial system following two high-profile bank failures in the United States and one in Switzerland. But regulators appear to have quelled those concerns by promising more lending and other steps if necessary to stabilize banks.

An update on Wednesday showed US consumer prices rose 5% in March from a year earlier, below last June’s high but still well above the Fed’s 2% target.

On Wall Street, the benchmark S&P 500 index fell 16.99, or 0.4%, to 4,091.95. About 65% of the stocks within the index fell.

The Dow Jones Industrial Average fell 38.29, or 0.1%, to 33,646.50. The Nasdaq Composite lost 102.54, or 0.9%, to 11,929.34.

Traders remain largely betting that the Fed will raise short-term interest rates by another quarter of a percentage point at its next meeting, according to CME Group data. They shaded some bets that the Fed would simply hold rates steady in May, something it hasn’t done for over a year.

Traders have made bets that the Fed will have to cut interest rates later this year to prop up the economy.

The bond market shows nervousness about a possible recession. The 10-year Treasury yield fell to 3.41% from 3.43% late Tuesday. The two-year Treasury yield, which is driven more by Fed expectations, fell to 3.96% from 4.03%.

Investors are eagerly awaiting the latest quarterly earnings reports that US companies will start publishing this week.

Expectations are low. Analysts are forecasting the worst drop in S&P 500 earnings per share since the pandemic crushed the economy in 2020. But many also expect this to mark the bottom and call for a return to growth later this year.

In energy markets, benchmark US crude fell 15 cents to $83.11 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.73 on Wednesday to $83.26. Brent crude, the price basis for international oil trade, fell 21 cents to $87.12 a barrel in London. It advanced $1.72 the previous session to $87.33.

The dollar rose to 133.27 yen from 133.19 yen on Wednesday. The dollar fell to $1.0989 from $1.0995.

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