TOKYO, May 9 (AP): Asian shares traded mixed Tuesday as investors took a wait-and-see view on the week ahead that’s full of reports on some of the market’s biggest worries, including stubbornly high inflation across the economy.
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Japan’s benchmark Nikkei 225 gained 0.7 per cent in morning trading to 29,141.93. Australia’s S&P/ASX 200 slipped 0.2 to 7,258.80. South Korea’s Kospi shed 0.4 per cent to 2,503.80. Hong Kong’s Hang Seng lost 0.3 per cent to 20,241.95, while the Shanghai Composite edged up nearly 0.2 per cent to 3,399.98.
On Wall Street, the S&P 500 edged up by less than 0.1 per cent to 4,138.12, coming off its worst week in nearly two months. The Dow Jones Industrial Average slipped 0.2 per cent to 33,618.69 while the Nasdaq composite added 0.2 per cent to 12,256.92.
A strong reading on US jobs, which calmed worries about a possible recession but raised concerns about high inflation, and fears about smaller and mid-sized banks dominated the previous week.
Weighed down by much higher interest rates, smaller and mid-sized banks are scrambling to assure Wall Street their deposits are secure and not at risk of seeing a sudden exodus, similar to the runs that toppled Silicon Valley Bank and others.
The larger concern for markets is that all the turmoil could cause banks to pull back on their lending. That in turn could raise the risk of a recession that many investors already see as highly likely.
A report Monday from the Federal Reserve showed many banks tightened their lending standards during the first three months of the year. Not only that, the survey suggested banks widely expect to raise their standards over the course of 2023. Among the reasons some smaller and mid-sized banks gave for the forecast were wanting to take less risk and worries about deposit outflows.
The Federal Reserve has lifted its benchmark interest rate to a range of 5 per cent-5.25 per cent, up from virtually zero early last year, in hopes of slowing high inflation. High rates do that by slowing the economy and hurting prices for investments, which runs the risk of causing a recession if they stay too high for too long.
The Fed said it’s not sure of its next move, as swaths of the economy have shown sharp slowdowns but the job market remains largely resilient.
Also hanging over the economy is the threat of a default by the US government on its debt.
Such an event would rock financial markets because US Treasurys are seen as the safest possible investment in the world. Treasury Secretary Janet Yellen said on ABC’s “This Week” on Sunday that there are “no good options” for the United States to avoid an economic “calamity” if Congress fails to raise the nation’s borrowing limit of USD 31.381 trillion in the coming weeks.
Later this week, the US government will give the latest monthly updates on inflation at the consumer and wholesale levels. Earnings reports will also arrive from Duke Energy, The Walt Disney Co. and News Corp.
In the bond market, the yield on the 10-year Treasury rose to 3.51 per cent from 3.44 per cent late Friday. It helps set rates for mortgages and other important loans.
The two-year Treasury, which moves more on expectations for Fed action, rose to 3.99 per cent from 3.92 per cent.
In energy trading, benchmark US crude fell 43 cents to USD 72.73 a barrel. Brent crude, the international standard, lost 47 cents to USD 76.54 a barrel.
In currency trading, the US dollar inched up to 135.08 Japanese yen from 135.04 yen. The euro cost USD 1.0989, down from USD 1.1008.
