As Economic Concerns Temper Wall Street Advances, Asian Stocks Are Divided

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After Wall Street ended Wednesday with a slight gain, markets in Asia had mixed results because investors were worried that global growth would be slowed down and key data wasn’t being released.

After the Bank of Japan bowed to pressure on the yen and raised the ceiling on the yield of the 10-year Japanese government bond to 0.50% the day before, Tokyo’s benchmark Nikkei 225 index fell 0.2%, to 26,387.72. The previous rate was 0.25 percent.

The Nikkei 225 index dropped 2.5% yesterday.

Bond yields spiked on Tuesday as global markets were unsettled by the Bank of Japan’s apparent willingness to consider hiking rates to combat inflation. In an effort to promote economic development, the BOJ has maintained a key lending rate of minus 0.1% for many years.

When interest rates rise, it raises the cost of borrowing money, which slows the economy and may reduce the upward pressure on prices while also causing stock and other investment values to fall.

In response to the widening gap between the BOJ’s benchmark rate and rising interest rates in the U.S. and other countries, the value of the yen has dropped sharply. This makes imported oil, consumer goods, and industrial inputs more expensive and puts more pressure on Japan’s economy.

In the end, the bond market’s dysfunction and the yen’s decline were what prompted the BOJ to take action. But the decision also marks the end of ultra-low rate policy, as noted by Stephen Innes of SPI Asset Management in a statement.

Because of the rapid pace at which central banks throughout the globe have been increasing interest rates, many economists and investors anticipate a global recession in 2023. Both the Federal Reserve and the European Central Bank have said that they will keep raising interest rates into next year. This is to make sure that inflation is brought under control.

In addition, recent outbreaks of COVID-19 in China, Japan, and other nations cast doubt on the efficacy of ongoing efforts to contain the epidemic.

While the Hang Seng rose by less than 0.1% to 19,103.10 in Hong Kong, the Shanghai Composite Index fell 0.3% to 3,065.78.

The Kospi in South Korea dropped by 0.2%, or $2.328.95, to a new all-time low. The Sydney Stock Exchange’s S&P/ASX 200 index rose 1.3%, closing at 7,115.10. Bangkok and Taiwan both saw stock price increases, while Mumbai saw a decline.

After beginning the day with minor losses and gains, the S&P 500 eventually ended the day up 0.1%. The final price was $3,821.62.

With a 0.3% gain, the Dow Jones Industrial Average closed at 32,849.74, while the Nasdaq composite gained less than 0.1% to 10,547.11. The Russell 2000 index of small-company stocks rose 0.5% to 1,748.02, outperforming the market overall.

With the small gains, the main indices were able to break their four-day losing streak.

The 10-year Treasury yield increased from 3.59% on Monday night to 3.70% today. As a result of this yield, mortgage rates and other key loans to the economy have risen, which has had an especially negative impact on the U.S. housing market.

On Tuesday, data showed that for the third month in a row, home construction in the United States slowed down. Building permits haven’t been this low since June of 2020, before the pandemic froze the economy.

Reserved sentiment was reflected in the yield on two-year U.S. Treasury bonds, which is more responsive to market anticipation of Fed policy changes. In spite of the uncertainty, it remained unchanged at 4.26%.

The value of one U.S. dollar increased to 132.09 Japanese yen from 131.62 yen on the forex market. As a result of Tokyo’s unexpected action on Tuesday, the value of the dollar fell by 4% in comparison to the yen.

At its lowest, the euro was worth $0.6015, down from $1.0626 only a few days earlier.

 

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