Asian markets were mostly lower in cautious trading on Monday ahead of a federal holiday in the United States.
It Concerns inflation and the risks of a global recession of the central bank’s efforts to rein in it. It appeared to outweigh Wall Street’s positive close on Friday.
Stocks fell in most major markets but rose in China. It is an expected move, keeping its 1- and 5-year loan prime rates unchanged.
Given China’s struggle to control outbreaks and its already faltering economy, “rate cuts in the coming months remain likely, as we expect the economic recovery to be slow under the Covid-zero policy. After this pause in rates, the government should deliver more fiscal stimulus,” Iris Pang, chief economist of Greater China at ING, said in a commentary.
Japan’s benchmark index, the Nikkei 225, fell 1.7% in morning trading to 25,534.68. Australia’s S&P/ASX 200 fell 0.7% to 6,432.00. South Korea’s Kospi fell 2.1% to 2,389.69. Hong Kong’s Hang Seng rose 0.2% to 21,109.16, while the Shanghai Composite was little changed, rising less than 0.1% to 3,317.69.
Two of the world’s three largest economies, China and Japan, are not involved in raising interest rates.
Last week, Japan’s central bank kept its interest rate policy close to zero. The comments by Bank of Japan Governor Haruhiko Kuroda close in search of clues. It is as, to what Tokyo might do with the weakening yen.
A weaker currency may help the profits of Japan’s exporting giants like Toyota Motor Corp., but it may also signal a fragile economy.
Kuroda expressed some concerns about the low yen and its impact on Japanese businesses but said he had no immediate plans to change monetary policy. That means a continued widening gap between interest rates and investment returns in Japan and the United States, and continued dollar strength.
“It is inescapable that the US dollar should rise significantly, as long as the emperor is in place, but once it is seen that the clothes are missing, it will go down. This could be one of the biggest market roller coaster opportunities of any market of all time,” Clifford Bennett, chief economist at ACY Securities, said in a commentary.
The U.S. dollar was trading at 134.88 Japanese yen early Monday, below 134.96 yen. The euro cost USD 1.0526, compared to USD 1.0498.
U.S. markets are closed Monday in observance of the Juneteenth holiday. But Federal Reserve Chairman Jerome Powell’s monetary policy testimony before the Senate Banking Committee and the House Financial Services Panel is scheduled for later this week.
Wall Street closed a difficult week, slightly higher. The S&P 500 rose 0.2% to 3,674.84. The Dow Jones Industrial Average fell 0.1% to 29,888.78, while the Nasdaq composite rose 1.4%, to 10,798.35.
The Russell 2000 index of smaller stocks rose 1% to 1,665.69.
Last week, the Fed raised its key short-term interest rate. Fed raised triple the usual amount for its biggest increase since 1994. It could consider another such mega-hike at its next meeting in July. A report last week on the U.S. economy was issued. A report showed that industrial output was weaker last month than expected.
Source: AP Business Writers Damian J. Troise and Stan Choe contributed.
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