Asian markets rebound after Wall Street sinks on rate fears
MarketWatch
2/7/2023
© AFP via Getty Images
BEIJING — Asian stock markets rebounded Tuesday after Wall Street sank under pressure from worries about higher interest rates and after Japan reported stronger wage gains than expected.
The Nikkei 225 in Tokyo gained 0.1% after the government reported wages rose 4.8% over a year earlier in December. That was close to a three-decade high as workers press for higher pay to keep pace with inflation.
The Shanghai Composite Index rose 0.3% and the Hang Seng in Hong Kong advanced 1%.
The Kospi in Seoul added 0.6% and Sydney’s S&P/ASX 200 slipped 0.4%. Stocks in New Zealand and Singapore declined while Taiwan and Indonesia advanced.
Wall Street sank for a second day Monday after unexpectedly strong U.S. data on hiring and wages dampened hopes the Federal Reserve might decide it has succeeded in cooling inflation and can wind down plans for more rate hikes.
Traders were looking ahead to a planned speech by Fed Chair Jerome Powell in Washington for possible clues about interest rate plans.
Expectations for the Fed to reverse course quickly are unrealistic, Clifford Bennett of ACY Securities said in a report.
“The mismatching of financial market pricing and economic reality is both stark and stretched,” Bennett said.
On Wall Street, the benchmark S&P 500 index fell 0.6% to 4,111.08. The Dow Jones Industrial Average lost 0.1% to 33,891.02 and the Nasdaq composite tumbled 1% to 11,887.45.
The yield on the two-year Treasury, which tends to track expectations for the Fed, leaped by an unusually wide margin to 4.47% from Friday’s 4.29% and the previous day’s 4.1%.
The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, jumped to 3.64% from 3.52% late Friday.
The Fed and central banks in Europe and Asia are trying to extinguish inflation that is at multi-decade highs by cooling economic activity. Traders worry they might be willing to tip the global economy into recession to achieve that.
Friday’s employment data showed the U.S. economy added twice as many jobs as expected last month despite higher interest rates. That is good for workers but the Fed worries wage gains will push up inflation. That fuels fears the U.S. central bank might push rates higher.
In energy markets, benchmark U.S. crude gained 83 cents to $74.94 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 72 cents to $74.11 on Monday. Brent crude the price basis for international oil trading, advanced 81 cents to $81.80 per barrel in London. It added $1.05 the previous session to $80.99.
The dollar fell to 132.17 Japanese yen from 132.67 yen.
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