Asian markets extend Wall St losses; China COVID cases rise
BANGKOK Shares fell in Asia on Monday following last week’s decline in Wall Street. However, signs of an increase in coronavirus infections China suggested that progress may be slow as the government eases its “zero-COVID” pandemic restrictions.
Attention was turning to an update on U.S. consumer prices and the Federal Reserve’s last meeting of the year.
The Fed’s next decision on inflation is expected Tuesday. Economists expect the consumer price index will show that inflation has slowed to 7.3% in October from 7.7% in October.
Meetings of major central banks including the Fed mean “there is potential for a whole load of volatility in markets; especially given the palpable tensions between inflation risks and fears of policy-induced recession,” analysts at Mizuho Bank said in a commentary.
A survey by Japanese manufacturers revealed a sharp decline in the outlook with recession becoming more likely in the U.S. as well as other major markets. The October-December business survey index dropped to minus 3.6% from 1.7% in quarter one. This was due to high energy prices and other raw material costs.
Hong Kong’s Hang Seng sank 2.1% to 19,475. 16 and the Shanghai Composite index shed 0.9% to 3,179.04.
Tokyo’s Nikkei 225 index gave up 0.2% to 27,842. 33 while the Kospi in Seoul lost 0.7% to 2,373.02.
Australia’s S&P/ASX 200 declined 0.5% to 7,180.80.
Markets were closed in Thailand for a holiday.
China was establishing more intensive care facilities as well as strengthening hospitals, as it reintroduces anti-virus controls which had confined millions to their homes, impeded economic growth and sparked protests. The precautions were taken as the number and severity of cases seemed to be increasing, but a sharp decline in the number tests makes it difficult to measure any changes.
President Xi Jinping’s government is officially committed to stopping virus transmission, the last major country to try. The latest developments suggest that the ruling Communist Party will accept more cases without imposing quarantines on travel or businesses, as it continues to reduce its “zero COVID” strategy. Stocks ended Friday with a choppy day on Wall Street.
The S&P 500 composite and Nasdaq combined fell 0.7% each, while the Dow Jones Industrial Average fell 0.9%. Russell 2000 index fell 1.2% more as smaller company stocks fell. These indexes had their first losing week in three years.
The S&P 500 finished 3.4% lower for the week and is now down 17.5% this year. The U.S. government reported that wholesale prices were 7.4% higher than they were a year ago in November. This is a slight decrease from October’s wholesale inflation rate, 8.1%. However, it was still slightly higher than economists expected.
The Fed has been aggressively raising interest rates in an effort to combat inflation and slow down economic activity. The key overnight rate at the central bank has been raised to a range of 3. 75% to 4%, up from basically zero as recently as March.
It is generally expected that it will raise rates by another half-point on Wednesday as it wraps up its two-day meeting.
Stocks are recovering some of their losses, as inflation has slowed down since the summer peak. It is still too high and the Federal Reserve will need to increase interest rates sharply to bring it under control.
In other trading Monday, U.S. benchmark crude oil gained 56 cents to $71. 58 per barrel in electronic trading on the New York Mercantile Exchange. It lost 44 cents to $71. 02 on Friday.
Brent crude, the pricing basis for international trading, added 50 cents to $76. 60 per barrel.
The U.S. dollar rose to 136. 80 Japanese yen from 136. 60 yen. The euro fell to $1. 0518 starting at $1 .0537.
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