TOKYO – Tokyo stocks edged lower on Friday, while shares in the rest of the region mostly gained, as investors watched closely ahead of a U.S. jobs report and monetary tightening by the U.S. The Federal Reserve was upset.
Shares in Seoul, Hong Kong, Shanghai and Sydney rose in morning trade. Markets are watching for signs of recovery in demand in China, as well as inflation in the region. Japan was an exception, where the Nikkei 225 fell.
“A busy week ahead for economic releases is expected with the main focus on US and Chinese inflation figures for October. China will also update October trade figures. Meanwhile UK third-quarter GDP figures reveals when German industrial production data will also lead,” S&P Global Market Intelligence said in its report next week.
Japan’s Nikkei 225 index NIK,
down 2.0% in morning trade. Australia S&P/ASX 200 XJO,
South Korea’s Kospi added 0.3% to 180721,
It gained 0.2%. Hong Kong’s Hang Seng HSI,
rose 5.7%, while the Shanghai Composite SHCOMP,
It increased by 2.1%. Stocks acquired in STI Singapore,
but in Malaysia FBMKLCI fell,
Taiwan Y9999,
and Indonesia JAKIDX,
The decline on Wall Street came a day after the central bank raised its benchmark rate for the sixth time this year and signaled it may need to keep rates on hold for a while before it can successfully beat the highest inflation in decades.
S&P 500 SPX,
fell 1.1%, while the Dow Jones Industrial Average DJIA,
0.5% down. Nasdaq COMP Heavyweight Technology,
closed 1.7% lower. The decline extended the streak of losses in the major indexes to a fourth day. They are each on pace for weekly losses.
Expectations of higher rates helped boost Treasury yields, weighing on stocks. The two-year Treasury note, which tends to track expectations for future Fed moves, rose to 4.72% from 4.61% late on Wednesday and is at its highest level since 2007, at according to Tradeweb.
The yield on the 10-year Treasury rose to 4.15% from 4.09% late Wednesday. The rise in the 10-year Treasury yield has caused mortgage rates to more than double this year, and that continues to put pressure on stocks.
The Fed added another jumbo rate hike on Wednesday, suggesting the pace of rate hikes may be slowing. The central bank also indicated that interest rates may eventually need to go even higher than previously thought to reduce the worst inflation in decades.
The central bank’s latest hike of three-quarters of a percentage point takes short-term interest rates to 3.75% to 4%, the highest level in 15 years. Wall Street is equally divided on whether the central bank will eventually raise rates next year from 5% to 5.25% or 5.25% to 5.50%.
High rates not only slow the economy by discouraging borrowing, they also make stocks look less attractive compared to lower-risk assets like bonds and CDs.
Stubbornly hot inflation has prompted central banks around the world to raise interest rates as well. On Thursday, the Bank of England announced the biggest interest rate increase in three decades. The increase is the eighth in a row and the largest since 1992.
Investors were expecting economic data that showed the Fed may be easing up on rate hikes. The fear is that the Fed will go too far in slowing the economy and trigger a recession.
Warmer-than-expected data from the jobs sector so far this week has signaled that the Fed will have to remain aggressive. On Friday, Wall Street will get a comprehensive update from the US government’s October jobs report.
In energy trading, the US crude benchmark CLZ22,
Each barrel rose 43 cents to $88.60. Brent crude oil BRNF23,
According to the international standard, each barrel decreased by 43 cents to 95.10 dollars.
In currency trading, the US dollar USDJPY,
from 148.16 yen to 148.14 Japanese yen.
