Bangkok: After Wall Street retreated on Tuesday, shares in Asia mostly declined as an unexpectedly positive economic report highlighted the difficulty of the Federal Reserve's fight against inflation.
Tokyo grew as other local markets declined. Oil prices rose along with US futures. Fitch Ratings revised down its forecasts for global economic growth on Tuesday as the Fed and other central banks raised interest rates, raising concerns about the prospect of a recession.
In its Global Economic Outlook report, it revised its September forecast for 2023 to 1.4% from 1.7% global growth forecast. China's projected growth rate was reduced from 4.5% to 4.1% per annum.
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China is expected to move forward with easing its strict pandemic restrictions, which has given markets relief from pressure on business, manufacturing and consumer spending.
.However, investors are also eyeing the Fed in hopes that it will slow interest rate hikes, aimed at preventing inflation from remaining too high.
The services sector, which accounts for the majority of the US economy, experienced unexpected growth in November, according to a report released Monday by the Institute for Supply Management. According to other reports, both business orders and durable goods orders at US factories grew more than expected in October.
While this news is good for the overall economy, it complicates the Fed's fight against inflation because it probably means interest rates will need to rise to ease price pressures.
According to Oanda's Edward Moya, "Inflation is likely to remain more stable, and the service sector of the economy is unlikely to contract. It is likely that the Fed may need to take additional action."
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The Federal Reserve is expected to raise interest rates by half a percentage point at its meeting next week, representing a break from a recent three-quarter percentage point rate hike. Since March, it has raised its benchmark rate six times, bringing it to a range of 3.75% to 4%, the highest in fifteen years. By mid-2023, Wall Street expects the benchmark rate to reach a peak range of 5% to 5.25%.
The aim is to slow growth without slamming the brakes and precipitating a recession that will slow business and consumer spending in the global economy.
Already volatile global energy markets are being further agitated by Russia's ongoing invasion of Ukraine. US crude oil fluctuated before shedding 3.8% after a group of world leaders decided to boycott most of Russian oil. In addition, they agreed to a $60 per barrel price cap on Russian exports.
The Hang Seng in Hong Kong fell 1.1% to 19,300.90 during Asian trade, while the Kospi in South Korea fell 0.6% to 2,404.39. At 3,209.27, the Shanghai Composite index shed 0.1%.
The Nikkei 225 index rose 0.3% to 27,909.65 in Tokyo. Shares in Thailand and Bangkok also declined.
On Monday, the S&P 500 fell 1.8% to 3,998.84. The tech-heavy Nasdaq fell 1.9% to 11,239.94 and the Dow Jones Industrial Average lost 1.4% to 33,947.10. Further losses in small-company stocks sent the Russell 2000 index down 2.8% to 1,840.22.
Shares of oil and gas companies fell as a result of a general decline in energy prices, which saw natural gas prices fall by 11.2%. Exxon Mobil declined 2.7%.
Nearly 95% of stocks in the benchmark S&P 500 index were down overall, with technology firms, banks and retailers accounting for some of the biggest market weights. Nvidia, a chip maker, dropped 1.6%, Bank of America fell 4.5%, and Amazon fell 3.3%.
Most bond yields have gone up. Mortgage rates are influenced by the yield on the 10-year Treasury, which rose to 3.59% from 3.49% late Friday.
Thursday will bring a weekly update on unemployment claims on Wall Street. The monthly report on producer prices for November is due on Friday.
Besides, benchmark US crude oil rose 63 cents to $77.56 a barrel in electronic trading on the New York Mercantile Exchange on Tuesday. It fell $3.05 to reach $76.93 a barrel.
Brent crude, the benchmark price for international trade, rose 57 cents to $83.25 a barrel.
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As of late Monday, the US dollar had risen to 136.88 Japanese yen from 136.71 yen. The euro rose from $1.0491 to $1.0497.