Asian shares were mostly lower on Thursday after Wall Street benchmarks fell and Japan reported a 14th straight month of monthly trade deficits due to high prices for oil and other commodities and a weakening yen.
Wall Street futures were mixed while oil prices gained.
Japan's trade deficit was a record high for the first half of the year, though it fell slightly from the month before and was smaller than analysts had forecast.
The Finance Ministry said Thursday that imports rose nearly 46% from the same month a year ago on the back of rising oil and gas costs. Imports have grown for 20 months straight on-year.
The dollar has gained strength versus currencies worldwide as inflation and recession concerns prompt investors to look for relatively stable investments. The yen is now trading at 32-year lows against the dollar, changing hands at 149.93 Japanese yen early Thursday, up from 149.81 yen a day earlier.
The euro slipped to 97.59 cents from 97.73 cents.
“As is often the case, rising U.S. yields and the strong U.S. dollar are the sledge hammers pounding global equities lower," Stephen Innes of SPI Asset Management said in a commentary.
In share trading, Tokyo’s Nikkei fell 0.9% to 27,006.96, recovering some lost ground, while the Kospi in Seoul declined 0.9% to 2,216.49. In Hong Kong, the Hang Seng shed 1.6% to 16,254.32.
The Shanghai Composite index was flat at 3,044.77 and Australia’s S&P/ASX 200 gave up 1% to 6,730.70.
The pullback on Wall Street on Wednesday came as investors reviewed quarterly earnings reports and Treasury yields climbed to multiyear highs, tempting traders with higher returns on relatively low-risk investments.
Early gains faded fast. The S&P 500 fell 0.7% to close at 3,695.16, while the Dow Jones Industrial Average slipped 0.3% to 30,423.81. The Nasdaq composite ended 0.9% lower, at 10,680.51.
Small companies fell more than the rest of the market, sending the Russell 2000 index 1.7% lower to 1,725.76.
Stocks were coming off of two days of gains, but trading has been unsteady throughout.
Netflix soared 13% and United Airlines rose 5% after releasing their quarterly results, while others, including Abbott Laboratories and M&T Bank, sank.
The yield on the 10-year Treasury, which influences mortgage rates, climbed to 4.13%, its highest level since June 2008. It was at 4.02% late Tuesday. The yield on the two-year Treasury, which tends to track expectations for future Federal Reserve action, rose to 4.54% from 4.43%.
A sharp move in the three-month Treasury may have helped put traders in a selling mood. The yield briefly hit 4.01% before inching back to 3.98%. Should the three-month Treasury yield rise above that of the 10-year Treasury, what’s known as an inversion, that would be a strong warning that the economy could be headed for a recession.
The Federal Reserve has been raising interest rates to temper high prices. Those increases are meant to make borrowing more difficult and slow economic growth in an effort to tame inflation, but the strategy risks stalling the already slowing U.S. economy.
Homebuilder Lennar fell 6% and home-improvement retailer Lowe’s slid 4.8% following a report showing that construction on new homes declined more than expected in September.
U.S. crude oil prices rose 3.3%, giving a boost to energy stocks. Exxon Mobil rose 3%. The White House plans to announce another release of oil from the U.S. strategic reserve.
Early Thursday, U.S. benchmark crude was up $1.07 at $85.59 per barrel in electronic trading on the New York Mercantile Exchange.
Brent crude, the international pricing standard, climbed 74 cents to $93.15 per barrel.
Investors have been focusing on the latest round of corporate earnings this week, watching for clues about how companies are dealing with the hottest inflation in four decades and how they intend to operate through the rest of the year and into 2023.
Household goods giant Procter & Gamble rose 0.9% after also reporting strong financial results. It is among a growing list of companies, including Hasbro and Johnson & Johnson, warning investors about a strong U.S. dollar cutting into revenue.
Central governments and banks worldwide are dealing with stubbornly hot inflation. British food prices rose at the fastest pace since 1980 last month, driving inflation back to a 40-year high.
