Hong Kong (AFP): Asian markets fell Friday on lingering recession worries as data indicated the US economy was slowing down, while Federal Reserve officials pressed their case for further interest rate hikes to battle stubborn inflation.
The losses tracked a sell-off on Wall Street, where tech firms took a hit from bets on further monetary tightening and carmakers tumbled due to concerns about a possible price war.
Investors were also spooked by earnings reports from US regional banks that pointed to a weakening profit outlook following sector turmoil last month that saw three lenders collapse.
Figures showing recurring unemployment benefit claims hitting their highest level since November 2021 combined with an increase in new applications for jobless insurance pointed to a softening labour market.
That came with news that the closely watched Philadelphia Fed Manufacturing Index fell more than expected and stood in contrast to a surprise surge in the New York Empire Fed Survey on Monday.
The readings indicated the world’s top economy was beginning to feel the weight of a year-long rate hike campaign by the Fed.
But while that suggests inflation could come down, there is a worry that a recession is coming.
“The trend higher in jobless claims clearly shows a slowing in the labour market and plays to views of a US recession in 2023,” said National Australian Bank’s Tapas Strickland.
And Edward Moya at OANDA said jobless claims “will soon see new cycle highs as corporate America has steadily announced more layoffs”. But he added that “the lag in when the layoffs will happen will keep wage pressures strong throughout the next few months”.
All three main indexes on Wall Street ended in the red, and Asia followed.
Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington and Taipei all fell.
While traders are keeping close tabs on the release of corporate earnings, their attention is turning to next month’s Fed rate decision.
The broad expectation is for another 25-basis-point hike, but debate surrounds whether the Fed will lift again in June or decide to pause, particularly in light of last month’s banking scare, which was widely seen as a result of the tightening.
On Thursday, Philadelphia Fed chief Patrick Harker said in prepared remarks that “some additional tightening may be needed to ensure policy is restrictive enough” to support the Fed’s dual mandate of keeping both unemployment and inflation low.
“Once we reach that point, which should happen this year, I expect that we will hold rates in place and let monetary policy do its work,” he said.
His comments were in line with those of New York Fed president John Williams and Fed governor Christopher Waller.
Harker said he did not expect inflation to come down to the bank’s two percent target until 2025.
Tokyo stocks open lower tracking US falls: Tokyo stocks opened lower on Friday, tracking falls on Wall Street, where auto sector woes pressured the market. The benchmark Nikkei 225 index was down 0.24 percent, or 68.01 points, at 28,589.56 in early trade, while the broader Topix index lost 0.35 percent, or 7.11 points, to 2,032.62.
After recent gains in the Japanese market and falls on US shares, “profit-taking actions are seen weighing on the market”, Mizuho Securities said in a note.
Overnight, Wall Street stocks ended lower following lacklustre corporate results from electric vehicle maker Tesla and several regional banks.
The blue-chip Dow Jones Industrial Average closed 0.3 percent lower at 33,786.62, while the broad-based S&P 500 dropped 0.6 percent and the tech-heavy Nasdaq Composite Index plunged 0.8 percent.
The dollar fetched 134.04 yen in early Asian trade, against 134.24 yen in New York late Thursday.
Among individual shares, Uniqlo casual wear operator Fast Retailing was down 1.11 percent at 32,190 yen, Toyota was off 0.85 percent at 1,798 yen, and shipping firm Mitsui O.S.K. Lines was down 0.43 percent at 3,480 yen.
Banks were lower, with Sumitomo Mitsui Financial Group trading down 1.19 percent at 5,660 yen and Mizuho Financial Group down 1.87 percent at 2,017 yen. Panasonic was up 0.39 percent at 1,288 yen and Hitachi was up 0.52 percent at 7,723 yen.
Japan’s consumer prices rose 3.1 percent in March, matching last month’s figure and roughly in line with expectations, according to official data released before the opening bell.
The data did not prompt strong market reactions.
