Asian stocks mostly fall as investors watch inflation

TOKYO

Asian stocks were mostly down on Friday in muted trading as investors kept an eye on inflation and awaited the outcome of a Communist Party congress in China.

Benchmarks fell in most regional markets, but rose in Mumbai.

China’s ruling party congress is expected to end on Saturday with the approval of leader Xi Jinping’s indefinite stay. The meeting, which is held every five years, sets the national agenda for the next five years and can send signals of possible changes in policy direction. One change seemingly missing from the agenda is an end to the harsh “zero COVID” rules that look likely to continue to disrupt life and business for months to come.

In other developments, Japan’s core consumer prices rose 3.0% in September from a year earlier, government data showed on Friday. This is the largest increase in eight years. It would also have been the highest for more than 30 years if the impact of the introduction and increase of the consumption tax had been excluded.

The Bank of Japan maintained an ultra-low interest rate policy, while the Federal Reserve and other central banks raised rates to counter soaring prices. Until recently, the Japanese central bank had devoted its efforts to fighting deflation, or the continuation of the downward spiral of prices.

In currency trading, the US dollar rose from 150.09 yen to 150.38 Japanese yen, adding to pressure on the BOJ to change its monetary policy as a weaker yen amplified the rise in prices in due to higher import costs. The euro was little changed at 97.76 cents, down from 97.87 cents.

Japan’s benchmark Nikkei 225 was down 0.4% in afternoon trade at 26,892.67. Australia’s S&P/ASX 200 fell 0.8% to 6,676.80. The South Korean Kospi edged down 0.3% to 2,212.61. Hong Kong’s Hang Seng fell 0.8% to 16,157.32, while the Shanghai Composite gained 0.2% to 3,041.21. Shares rose 0.4% in Mumbai.

“The overall mood remains cautious, with shrinking gains on Wall Street and yields trending higher on a more hawkish political outlook,” Yeap Jun Rong, market strategist at IG in Singapore, said in a statement.

Treasury yields hit multi-year highs, a trend that helped push up rates on mortgages and other loans. The 10-year Treasury yield climbed to 4.23% from 4.14% on Wednesday night and is at its highest level in 14 years. The two-year Treasury yield, which tends to track expectations for future Federal Reserve action, rose to 4.61% from 4.56%.

Investors remain concerned about inflation, as higher interest rates tend to discourage borrowing and investing, slowing economic activity. This could tip economies into recession.

Wall Street stocks lost ground on Thursday.

The S&P 500 fell 0.8% and the Dow Jones Industrial Average slipped 0.3%. The Nasdaq composite fell 0.6%, while the Russell 2000 index lost 1.2%.

Corporate earnings remain a top priority for Wall Street, and results have been mixed so far.

IBM rose 4.7% after its third-quarter earnings and revenue beat analysts’ forecasts. AT&T jumped 7.7% after also reporting strong results.

Tesla fell 6.6% after saying it will miss its target for vehicle deliveries this year. Union Pacific fell 6.8% after the rail operator predicted slower growth, suggesting the economy could slow. Its rival CSX fell 3%. American Airlines fell 3.8% after reporting its latest results.

Allstate fell 12.9% after giving investors a disappointing financial update.

The US jobs market remains strong, with the latest government data showing the number of Americans applying for unemployment benefits fell last week and remains at historic lows.

The good health of the job market is a sticking point since it suggests that the Fed will have to persist in raising interest rates. The central bank raised its key rate to a range of 3% to 3.25%. Just over six months ago, it was close to zero.

The increases are putting pressure on other sectors of the economy, including the housing market, where mortgage rates are now at 15-year highs. Mortgage buyer Freddie Mac reported Thursday that the 30-year average key rate rose this week to 6.94% from 6.92% last week.

In energy trading, benchmark U.S. crude fell 8 cents to $84.43 a barrel in electronic trading on the New York Mercantile Exchange. It lost 1 cent on Thursday to $84.51 a barrel. Brent crude, the international standard, fell 2 cents to $92.36 a barrel.

This story was originally published October 21, 2022 2:37 a.m.