Asia stocks mixed after Wall St dips on US recession warning

By JOE McDONALD
AP Business Writer

BEIJING (AP) — Asian stock markets were mixed Thursday after the Federal Reserve said its economists expect a “mild recession” this year.

Shanghai and Hong Kong declined while Tokyo and Seoul advanced. Oil prices edged lower.

Wall Street closed lower Wednesday after the U.S. government reported inflation still is higher than the Fed’s target and notes from the central bank’s latest meeting said its economists expect lower lending to cause a “mild recession.” Traders already saw an increasing likelihood of at least a brief U.S. recession this year following interest rate hikes to cool inflation.

“It seems to be brewing recession fears that shook risk sentiments,” said Yeap Jun Rong of IG in a report. The Fed report “erodes chatters of a soft landing scenario.”

The Shanghai Composite Index lost 0.1% to 3,324.30 while the Nikkei 225 in Tokyo added 0.1% to 28,108.67. The Hang Seng in Hong Kong retreated 0.9% to 20,125.48.

The Kospi in Seoul gained 0.1% to 2,554.19 while Sydney’s S&P ASX gave up 0.2% to 7,325.70. New Zealand and Southeast Asian markets declined.

Traders have been worried the Fed and other central banks in Europe and Asia might tip the global economy into recession as they try to extinguish inflation that is near multi-decade highs.

That anxiety was briefly drowned out by fears about the health of the global financial system following two high-profile bank failures in the United States and one in Switzerland. But regulators appear to have quelled those concerns by promising more lending and other steps if needed to stabilize banks.

An update Wednesday showed U.S. consumer prices rose 5% in March over a year earlier, down from last June’s peak but still well above the Fed’s 2% target.

On Wall Street, the benchmark S&P 500 index fell 16.99, or 0.4%, to 4,091.95. About 65% of stocks within the index fell.

The Dow Jones Industrial Average slipped 38.29, or 0.1%, to 33,646.50. The Nasdaq composite lost 102.54, or 0.9%, to 11,929.34.

Traders are still largely betting the Fed will raise short-term interest rates by another quarter of a percentage point at its next meeting, according to data from CME Group. They shaded some bets toward the possibility that the Fed will merely hold rates steady in May, something it has not done for more than a year.

Traders have built bets the Fed will have to cut interest rates later this year in order to prop up the economy.

The bond market shows nervousness about a potential recession. The 10-year Treasury yield slipped to 3.41% from 3.43% late Tuesday. The two-year Treasury yield, which moves more on expectations for the Fed, fell to 3.96% from 4.03%.

Investors are looking ahead to the latest quarterly profit reports U.S. companies are due to start releasing this week.

Expectations are low. Analysts forecast the worst drop in S&P 500 earnings per share since the pandemic was crushing the economy in 2020. But many also expect this to mark the bottom and call for a return to growth later this year.

In energy markets, benchmark U.S. crude lost 15 cents to $83.11 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.73 on Wednesday to $83.26. Brent crude, the price basis for international oil trading, shed 21 cents to $87.12 per barrel in London. It advanced $1.72 the previous session to $87.33.

The dollar gained to 133.27 yen from Wednesday’s 133.19 yen. The dollar declined to $1.0989 from $1.0995.