Asian shares fell Monday after another week of sizable losses on Wall Street, as investors braced for another interest rate hike by the U.S. Federal Reserve.
Japan’s markets were closed for a holiday. Oil prices rose while U.S. futures declined.
On Friday, a stark warning Friday from FedEx about rapidly worsening trends in the economy gave investors more to worry about. The S&P 500 fell 0.7%, while the Nasdaq lost almost 1%. The Dow lost almost half a percent.
Markets have been on edge because of stubbornly high inflation and the increases in interest rates being used to fight it. The fear is that the Fed and other central banks might overshoot their policy targets, triggering a recession.
Most economists forecast that the Fed will jack up its primary lending rate another three-quarters of a point when the central bank’s leaders meet this week.
“Fact is, hawkish expectations built on the ‘hot under the hood' U.S. inflation print means that markets have good reason to be braced for headwinds amid prospects of higher (for longer) rates; and arguably “higher for longer” USD (dollar) as well," Vishnu Varathan of Mizuho Bank said in a commentary.
The S&P 500 sank 4.8% for the week, with much of the loss coming from a 4.3% rout on Tuesday following a surprisingly hot report on inflation.
All the major indexes have now posted losses four out of the past five weeks.
In Asia on Monday, Hong Kong's Hang Seng lost 0.9% to 18,586.47 while the Shanghai Composite index shed 0.3% to 3,115.87. Australia's S&P/ASX 200 edged 0.1% lower, to 6,731.80. In Seoul, the Kospi sank 1% to 2,360.22.
Japan's central bank meets Wednesday and Thursday amid rising pressure to counter a sharp decline in the yen, which is trading near 145 to the dollar after sharp increases in the value of the greenback. That has raised costs for businesses and consumers, who must pay more for imports of oil, gas and other necessities.
However the Bank of Japan has held firm so far in maintaining an ultralow benchmark rate of minus 0.1% in hopes of stimulating investment and spending.
FedEx sank 21.4% for its biggest single-day sell-off on record Frday after warning investors that profits for its fiscal first-quarter will likely fall short of forecasts because of a drop-off in business. The package delivery service is also shuttering storefronts and corporate offices and expects business conditions to further weaken.
The S&P 500 fell 0.7% to 3,873.33. It’s now down 18.7% so far this year. The Dow Jones Industrial Average dropped 0.5% to 30,822.42 and the Nasdaq slid 0.9% to 11,448.40.
Makers of household goods, which are typically considered less risky investments, held up better than the rest of the market. Campbell Soup rose 1.3%.
Higher interest rates tend to weigh on stocks, especially the pricier technology sector. Technology stocks within the S&P 500 are down more than 26% for the year and communications companies have shed more than 34%. They are the worst performing sectors within the benchmark index so far this year.
The housing sector is also hurting as interest rates rise. Average long-term U.S. mortgage rates climbed above 6% this week for the first time since the housing crash of 2008. The higher rates could make an already tight housing market even more expensive for homebuyers.
Reports this week from the government showed that prices for just about everything but gas are still rising, the job market is still red-hot and consumers continue to spend, all of which give ammunition to Fed officials who say the economy can tolerate more rate hikes.
In other trading Monday, U.S. benchmark crude gained 58 cents to $85.69 per barrel in electronic trading on the New York Mercantile Exchange. It edged up 1 cent to $85.11 per barrel.
Brent crude oil rose 72 cents to $92.07 per barrel.
The dollar strengthened to 143.14 Japanese yen from 142.94 yen. The euro slipped to 99.98 cents from $1.0014.
