Stock Market Today: Asian Shares Mostly Decline After Wall Street Drops On Higher Bond Yields

Japan's inflation data showed consumer prices rose 3.1 per cent from a year earlier in July, down from 3.3 per cent in June. But that was still higher than the 2.5 per cent forecast by some analysts and above the Bank of Japan's target at 2 per cent
Asian Shares Mostly Decline After US Stocks Shuffle Lower
Asian Shares Mostly Decline After US Stocks Shuffle Lower

Asian shares mostly slipped Friday as rising yields in the bond market on Wall Street set off expectations that high interest rates would continue in the US
     
Japan's inflation data showed consumer prices rose 3.1 per cent from a year earlier in July, down from 3.3 per cent in June. But that was still higher than the 2.5 per cent forecast by some analysts and above the Bank of Japan's target at 2 per cent.
     
The core consumer price index, which eliminates energy and fresh food prices from the measure, rose 4.3 per cent on year, according to the Ministry of Internal Affairs and Communications.
     
Japan's Nikkei 225 slipped 0.6 per cent to finish at 31,450.76. Australia's S and P/ASX 200 was virtually unchanged, inching up less than 0.1per cent to 7,148.10.
     
South Korea's Kospi shed 0.7 per cent to 2,502.52. Hong Kong's Hang Seng dropped 1.7 per cent to 18,017.77, while the Shanghai Composite edged down nearly 0.7per cent to 3,142.10.
     
Also on investors' minds is what appears to be China's shaky recovery from the negative economic effects of the coronavirus pandemic.
     
“In terms of China, there has been very little cause for optimism due to the dire macro indicators, a plunging yuan and property developers hitting troubled waters,” said Tim Waterer, chief market analyst at KCM Trade.
     
Wall Street fell for a third straight day, with the S and P 500 sinking 33.97, or 0.8 per cent, to 4,370.36. August is on track to be its worst month of the year by far.
    
The Dow Jones Industrial Average dropped 290.91 points, or 0.8 per cent, to 34,474.83, and the Nasdaq composite fell 157.70, or 1.2 per cent, to 13,316.93.
     
The losses were widespread. Some of the hardest hit were high-growth stocks seen as the most vulnerable to higher interest rates.
     
Meta Platforms sank 3.1 per cent and Tesla dropped 2.8 per cent. Apple fell 1.5 per cent and was the heaviest weight on the S and P 500.
     
Stocks broadly have been retreating in August following a torrid first seven months of the year. That's in part because a swift rise in bond yields is forcing a reassessment of how much to pay for stocks.
     
The 10-year Treasury, which is the centrepiece of the bond market, is now yielding 4.28 per cent after touching its highest level since October.
     
If it reaches 4.34 per cent, it will be at a level unseen since 2007, according to Tradeweb.
     
That's before the financial crisis and Great Recession caused yields to collapse to record lows. The 10-year Treasury was yielding less than 0.70 per cent three years ago.
     
Higher yields are good for bond investors, who get fatter payouts for their investments.
     
But it hurts stock prices because investors are suddenly less inclined to pay high prices for investments that aren't as steady as bonds.
     
Higher yields also mean borrowers have to pay more to get cash, which can crimp corporate profits and cause unforeseen things to break in the system, like the three high-profile US bank failures that shook markets this spring.
     
Homebuyers are feeling the sting. The average rate on a 30-year mortgage hit its highest level this week in more than 20 years.
     
Yields have been on the rise as more reports show the US economy remains remarkably resilient.
     
On the upside for markets, the data mean the economy has been able to avoid a long-predicted recession.
     
But on the downside, it could also keep upward pressure on inflation. That would give the Federal Reserve reason to keep interest rates higher for longer.
     
More data came in Thursday showing a firm US economy.
     
Fewer workers applied for unemployment benefits last week than economists expected. It's the latest signal that the job market continues to be solid.
     
A survey of manufacturers in the mid-Atlantic region also unexpectedly showed growth, when economists were expecting another month of contraction.
     
Manufacturing has been one of the areas of the economy hit hardest by much higher interest rates.
     
“The labor market continues to be resilient — maybe too resilient for the Fed's liking,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
     
Other strong economic data recently, including a report showing an acceleration in sales growth at US retailers, mean the Fed could hike interest rates again at some point, he said.
     
Hopes had been rising on Wall Street that the Fed could be done after it raised its main rate last month to the highest level in more than two decades.
     
Traders had also been hoping the Fed would begin cutting rates early next year. Such a move would be a relief for markets because high rates work to lower inflation by slowing the entire economy and hurting prices for investments.
     
Inflation has cooled considerably from its peak above 9 per cent last summer.
     
But consumers still paid prices that were 3.2 per cent higher in July than a year earlier, and economists say the last stretch to get inflation down to the Fed's 2 per cent target may prove to be the most difficult.
     
A stronger economy would burn more fuel, and oil prices rose Thursday to recover some of their slide from earlier in the week. That helped propel stocks of energy producers to some of the rare gains within the S and P 500. Exxon Mobil rose 1.9 per cent and ConocoPhillips gained 1.8 per cent.
     
In energy trading on Friday, benchmark US crude gained 22 cents to USD 80.61 a barrel. Brent crude, the international standard, rose 5 cents to USD 84.17 a barrel.
     
In currency trading, the US dollar inched down to 145.23 yen from 145.83 yen. The euro cost USD1.0889, up from USD 1.0873. (AP)  FZH
 

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