HONG KONG: Stocks were mixed in Asia on Friday as inflation soared, and a series of interest rate hikes around the world continued to stoke recession fears, while a big miss in China’s growth stumbled. added to concern about the world’s largest economies.
Below-par earnings from Wall Street titans JP Morgan and Morgan Stanley have deepened fears that corporate results will be hit by the economic fallout from a range of problems including rising prices, tighter monetary policy and the war in Ukraine.
After rate hikes by a number of countries this week, investors expect the Federal Reserve (Fed) to raise rates this month by 75 basis points as authorities struggle to rein in high inflation for decades, although some observers suggest a 1 percentage point move could be on the cards.
The latest outsized impression of US inflation this week – caused by a surge in energy prices – followed news last Friday that job creation remained strong in June, giving the Fed room to necessary maneuver to continue its campaign to withdraw money from the financial system.
However, while experts warn that raising rates too much risks hammering the economy, the bank has made it clear that its number one priority is to bring prices down.
This sent the dollar higher across the board, and Standard Chartered Bank’s Steve Englander warned there was no end in sight to the unit’s advance.
The currency’s strength is “largely a flight to safety,” he told Bloomberg TV.
“The problem is that until we see the light at the end of the tunnel when it comes to inflation or oil prices due to supply creation rather than demand destruction, it is difficult to call a summit.”
As investors increasingly anticipate a recession next year, equities are struggling to see bullish momentum.
Wall Street’s three major indices mostly fell, with sentiment weighed by disappointing reports from JP Morgan Chase & Co. and Morgan Stanley. They will be followed in the coming days by Citigroup, Goldman Sachs and Bank of America.
Early in Asian trade, Hong Kong fell and mainland China markets fluctuated after data showed China’s economy grew just 0.4% in the second quarter as it was battered by Covid lockdowns in major cities including Shanghai and Beijing.
The reading was well outside the 1.6% forecast by analysts in an Agence France-Presse survey, although there is hope it will give authorities further impetus to unveil new stimulus measures .
Elsewhere, Tokyo, Singapore, Seoul and Taipei advanced but Sydney, Wellington, Manila and Jakarta fell.
In the foreign exchange markets, the euro continues to hover around parity with the greenback as the European Central Bank (ECB) grapples with a series of problems, including an energy crisis, as Russia fears to cut its gas supplies in retaliation for war sanctions against Ukraine.
Meanwhile, policymakers have yet to raise interest rates – leaving the bank far behind the Fed – amid concerns about large differences, or “fragmentation”, between individual sovereign bond rates across the zone. euro.
Added to this is a new political upheaval in Italy as the government there is on the brink.
“With a weak currency, soaring inflation, risk of recession due to the energy crisis and political unrest in Italy, the ECB faces an impossible mission to solve all its problems simultaneously with monetary policy,” said Stephen Innes. of SPI Asset Management.
“Advancing a 50 basis point hike and revealing a strong anti-fragmentation tool seems the optimal solution for the central bank…but it is unlikely to be enough to support a sustained euro rebound.”
Traders watch the Middle East as Biden travels the region, his visit to Riyadh later today the main focus as he tries to persuade the kingdom to help lower crude prices by pumping more .
While the two main contracts have in recent weeks fallen below $100 due to demand fears caused by a possible recession, there are disagreements over the outlook for the market, with some predicting that it will reach new highs and d others warning it could drop to $65.
Key figures around 02:30 GMT
Tokyo – Nikkei 225: 0.6% higher at 26,797.47 (pause)
Hong Kong – Hang Seng Index: DOWN 0.5% to 20638.71
Shanghai – Composite: UP 0.2% to 3,287.59%
Euro/dollar: UP at $1.0033 against $1.0022 on Thursday
Pound/dollar: UP to $1.1839 from $1.1826
Euro/pound: UP at 84.75 pence against 84.72 pence
Dollar/yen: DOWN to 138.91 yen against 138.93 yen
West Texas Intermediate: UP 0.3% to $96.08 a barrel
North Sea Brent Crude: UP 0.4% to $99.50 a barrel
New York – Dow: DOWN 0.5% to 30,630.17 (closing)
London – FTSE 100: 1.6% drop to 7,039.81 (close).