By YURI KAGEYAMA, AP Business Writer
TOKYO (AP) — Asian stocks fell across the board Tuesday after Wall Street plunged into a bear market, signaling that major U.S. benchmarks and individual stocks are down 20% or more since a recent maximum over a prolonged period.
Benchmarks fell in Japan, Australia, South Korea and China. The continued decline of the Japanese yen against the dollar has stopped.
At the center of the sell-off was the US Federal Reserve, which is struggling to control inflation. His main method is to raise interest rates, a blunt tool that could slow the economy too much and risk a recession if used too aggressively.
Some economists speculate that the Fed could raise its benchmark rate by three-quarters of a percentage point on Wednesday. That’s triple the usual amount and something the Fed hasn’t done since 1994.
“Another day to digest the recent US inflation data, and another day closer to the June FOMC meeting, and the global markets, we and those of us here in Asia have been showing they don’t like where where the global economy is right now. Robert Carnell, Asia-Pacific regional head of research at ING, in a report.
Japan’s Nikkei 225 lost 1.9% in morning trading at 26,476.71. Australia’s S&P/ASX 200 fell 4.8% to 6,598.30 after reopening from a holiday on Monday. South Korea’s Kospi lost 1.0% to 2,479.23. Hong Kong’s Hang Seng fell 1.4% to 20,782.63, while the Shanghai Composite slipped 0.8% to 3,230.41.
Adding to concerns about Japan’s fragile economy is the yen’s decline, recently at 135, the lowest level against the US dollar since 1998. The US dollar fell to 134.40 Japanese yen from 134.46 yen, as the Bank from Japan somewhat mitigated the yen’s weakness. Governor Haruhiko Kuroda’s comments expressing concern about their decline.
The euro cost 1.0418 dollars, against 1.0409 dollars.
“In this context, equities in Asia are unlikely to be spared the pain,” said Tan Boon Heng of Mizuho Bank in Singapore.
On Wall Street, the S&P 500 index sank 3.9% to 3,749.63. It is 21.8% below its record set earlier this year and now in a bear market. The Dow lost 876.05, or 2.8%, to 30,516.74 on Monday, after falling more than 1,000 points. The Nasdaq Composite fell 4.7% to 10,809.23.
The drop was the first opportunity for investors to trade after having the weekend to reflect on Friday’s news that inflation is getting worse, not better.
With the Fed seemingly forced to be more aggressive, prices fell in global rout for everything from bonds to bitcoin, from New York to New Zealand. Some of the steepest declines hit big winners from the era of easier low rates, such as high-growth tech stocks and other longtime investor favorites. Tesla fell 7.1% and Amazon fell 5.5%. GameStop fell 8.4%.
“The best thing people can do is not to panic and not sell at the bottom,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, “and we’re probably not at the bottom. ”
Markets are bracing for larger-than-usual gains, along with some discouraging signs about the economy and corporate earnings, including a record low preliminary reading on consumer confidence soured by high gas prices.
The economy is still holding up overall, but the danger is that the job market and other factors are so hot that they will fuel higher inflation.
Wall Street’s sobering realization that inflation is accelerating, not peaking, has pushed US bond yields to their highest levels in more than a decade. The two-year Treasury yield soared to 3.36% from 3.06% late Friday in its second big move in a row. It previously hit its highest level since 2007, according to Tradeweb.
The 10-year yield jumped to 3.37% from 3.15%, and the higher level will make mortgages and many other types of loans more expensive. It hit its highest level since 2011.
Higher yields mean bond prices are falling. That happens rarely and is a painful blow to older, more conservative investors who rely on them as the safest parts of their savings.
Some of the biggest successes came in the case of cryptocurrencies, which soared early in the pandemic as ultra-low rates encouraged some investors to make the riskier investments. Bitcoin fell more than 14% from the previous day and fell below $23,400, according to Coindesk. It’s back to where it was at the end of 2020 and down from a peak of $68,990 late last year.
In energy trading, benchmark US crude rose 11 cents to $121.04 a barrel in electronic trading on the New York Mercantile Exchange. It gained 26 cents at $120.93 on Monday.
Brent crude, the international standard, added 11 cents to $122.38 a barrel.
AP business writer Stan Choe contributed.
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