Asian stocks fall on Fed worries after Wall Street selloff

TOKYO — Asian stocks were mostly down on Tuesday, echoing a broad sell-off on Wall Street amid speculation of another U.S. Federal Reserve interest rate hike.

Benchmarks in Asia fell in Tokyo, Sydney, Seoul and Hong Kong, but stocks were little changed in Shanghai. The latest market drop comes as investors grapple with uncertainty over when the highest inflation in decades will come down significantly, how much the Fed will have to raise interest rates to bring it under control and how much rate hikes will slow the economy.

Investors will look to better understand these unknowns later this week, when the Federal Reserve holds its annual meeting in Jackson Hole, Wyoming.

“The pessimistic mood on Wall Street is also showing in the Asian session, and while another round of rate cuts to China’s benchmark lending rate yesterday may help cushion some losses, the overall upside may still remain. limited amid risk avoidance,” said Yeap Jun Rong, market strategist at IG in Singapore.

The People’s Bank of China lowered a lending rate on Monday, a week after cutting interest rates.

Japan’s benchmark Nikkei 225 lost 1.2% in afternoon trade to 28,454.45. Australia’s S&P/ASX 200 slipped 1.1% to 6,971.10. The South Korean Kospi fell 1.1% to 2,435.26. Hong Kong’s Hang Seng fell 0.8% to 19,509.56, while the Shanghai Composite was little changed, rising less than 0.1% to 3,278.64.

“Investors are cautious as the continued streams of risk have hit global markets,” said Anderson Alves of ActivTrades, noting that rising gas prices pose a significant risk, especially for Europe.

The S&P 500 saw its biggest decline since mid-June, slipping 2.1%, nearly doubling its losses from last week, when it snapped a four-week winning streak. The Dow Jones Industrial Average fell 1.9% and the Nasdaq 2.5%.


        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        

Tech companies and retailers suffered some of the heaviest losses on Monday. Stocks of smaller companies also lost ground, driving the Russell 2000 Index down 2.1%.

Bond yields gained ground. The 10-year Treasury yield, which influences rates on mortgages and other loans, rose to 3.03% from 2.97% on Friday evening.

The broader market losses follow a week-long rally. Investors are trying to figure out where the economy is going from here, as stubbornly high inflation is hurting businesses and consumers. Record inflation is also prompting investors to focus on central banks and their efforts to combat high prices without further hurting economic growth.

“You’ve had quite a rally and there’s reason not to know where we go from here,” said Tom Martin, senior portfolio manager at Globalt Investments. “There is still decent potential for a recession.”

Last week’s minutes from the July Federal Reserve board meeting confirmed plans for further rate hikes despite signs of weaker economic activity. Traders fear that aggressive measures to slow the economy could go too far and cause a recession.

Fed Chairman Jerome Powell is due to speak Friday morning at the central bank’s annual meeting in Jackson Hole, which begins Thursday. The Fed is holding its meeting after a busy week of economic and corporate data that showed inflation continues to weigh on the economy, but consumer spending remains resilient.

“I don’t think we’re out of the woods on inflation yet,” Martin said. “We still don’t really know how inflation is going to evolve and what the Fed is going to do.”

In energy trading, benchmark U.S. crude fell 54 cents to $90.23 a barrel. Brent crude, the international standard, added 68 cents to $97.16 a barrel.

In currency trading, the US dollar fell to 137.34 Japanese yen from 137.49 yen. The euro was little changed at 99 cents.

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AP Business Writers Damian J. Troise and Alex Veiga contributed.

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Yuri Kageyama is on Twitter at https://twitter.com/yurikageyama

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