On Wednesday, investors were uneasy due to negative news on the US labor market.
The main stock indices in Asia were under stress on Wednesday as investors fretted about the future for the world and the possibility of a recession as the US labor market showed indications of weakening.
Bonds held onto gains, the dollar nursed losses, and stocks struggled to advance as investors became concerned about the US economy’s prospects in response to the news.
Holidays in Hong Kong and China also slowed trading around the region, which contributed to the MSCI Asia-Pacific index excluding Japan doing slightly better than flat.
However, the rising yen and concerns about a US recession caused its car and energy sectors to decline, sending Japan’s Nikkei share average plunging to its first loss in four days.
The Nikkei continued to fall throughout the afternoon session and finished the day down 1.68% at 27,813.26, falling for the first time this month below the symbolic 28,000 level.
The three-day increase of 1.99% by the larger Topix was followed by a decline of 1.92% to 1,983.84.
Investors wanting to lock in gains sold shares that had been rising recently, with energy firms among the worst-hit.
The yen continued to rise, reaching a high of 131.315 to the dollar, which dampened mood generally and hurt automakers in particular by reducing the value of their international sales. Mazda Motor fell 3.33%, Honda Motor Co. down 2.23%, and Toyota Motor Corp. fell 2.45%.
Sydney, Bangkok, and Jakarta also decreased while Singapore, Mumbai, Seoul, Manila, and Wellington increased elsewhere in the area.
Fears of Fed Reserve Tightening
All three of the main US market indexes fell overnight as concerns that the Federal Reserve’s rate-tightening drive may lead to a severe slump were heightened by signs that the economy was slowing.
According to recent statistics, manufacturing orders continued to decline for a second month, and job opportunities reached their lowest level in two years.
The dollar followed the fall to two-month lows as two-year treasury rates, which closely mirror short-term rate forecasts, plunged by about 15 basis points.
In a letter to shareholders, Jamie Dimon, chief executive of JPMorgan Chase & Co., the largest bank in the United States, warned that the market’s prospects of a recession have grown and that the confidence concerns that have alarmed banks have not subsided.
“The current crisis is not yet over,” he said. There will be effects from it for years to come, even after it is over.
Over the last several weeks, US interest rate futures have sharply risen as markets anticipate that under-pressure banks would limit lending nonetheless, eliminating the need for monetary regulators to take action.
According to the most recent futures price, there is a better-than-even probability that the Federal Reserve will stop rising interest rates and that it will make more than 60 basis points of cuts this year.
The whole U.S. yield curve is below the top of the Fed funds rate window, which is at 5%, with the two-year rates at 3.8459% and the 10-year yields at 3.3517%.
Overnight, the price of gold, which has no yield, rose beyond $2,000 for the first time in a year.
Rate Increase in New Zealand
Markets anticipate that foreign central banks will continue to raise interest rates to control inflation outside of the US. The majority of FX strategists surveyed by Reuters believe that the dollar will continue to face pressure this year.
In contrast to Australia’s central bank, which stopped raising interest rates on Tuesday, the Reserve Bank of New Zealand startled markets on Wednesday with a 50 basis point increase that pushed the kiwi up 1% at one point to reach a two-month high.
Investors in other countries anticipate a few more rate increases in Europe, where German exports have unexpectedly picked up. The euro held onto a two-month high against the dollar set overnight at $1.0973. At $0.6355, the kiwi was recently up 0.7%.
The greatest development prospects are in China and Asia more generally. Data released by Japan on Wednesday revealed that although industry production is still poor, services activity expanded in March at its strongest rate in more than nine years.
Data earlier in the week revealed that China’s vast manufacturing sector lost impetus in March, although investment inflows for the first quarter reached a record high due to foreign investors’ confidence in future governmental support for industry.
Nikkei 225 in Tokyo is down 1.68% at 27,813.26 (close).
Hang Seng Index for Hong Kong: CLOSED
CLOSED Shanghai – Composite
At 09:36 GMT, the FTSE 100 in London was up 0.27% at 7,655.18.
At Tuesday’s finish in New York, the Dow was down 0.59% at 33,402.38.