Asian markets were mostly lower in cautious trading Monday ahead of a federal holiday in the US
Concerns about inflation and risks of a global recession due to the central bank’s efforts to contain it appeared to outweigh Wall Street’s upbeat finish on Friday.
The price of the world’s most popular cryptocurrency slipped back below the psychological benchmark of $20,000 early Monday after rallying to $20,742. According to cryptocurrency news site CoinDesk, Bitcoin was down nearly 10% to below $18,600 over the weekend.
In the afternoon in Tokyo it was $19,837.14.
Stocks fell in most major Asian markets but edged up in China, which left its 1-year and 5-year lending rates unchanged in a widely anticipated move.
With China struggling to bring outbreaks under control and its already faltering economy, “rate cuts are still likely in the coming months as we expect the economic recovery to be slow amid the COVID-zero policies . After this interest rate pause, the government should provide more fiscal stimulus,” said Iris Pang, chief economist for ING Greater China, in a comment.
Japan’s benchmark Nikkei 225 slipped 1.7% to 25,534.68 in morning trade. Australia’s S&P/ASX 200 slipped 0.7% to 6,432.00. South Korea’s kospi fell 2.1% to 2,389.69. Hong Kong’s Hang Seng edged up 0.2% to 21,109.16, while the Shanghai Composite was little changed, gaining less than 0.1% to 3,317.69.
Two of the world’s three largest economies, China and Japan, do not participate in rate hikes.
Last week, the Bank of Japan kept interest rates close to zero, despite comments from Bank of Japan Governor Haruhiko Kuroda awaiting clues as to what Tokyo might do about the weakening yen.
A weaker currency can hurt gains for Japan’s export giants like Toyota Motor Corp. benefit, but it can also indicate a weak economy.
Kuroda expressed some concerns about the low yen and its impact on Japanese companies, but said he has no immediate plans to change monetary policy. That means a widening gap between interest rates and investment returns in Japan and the US and continued dollar strength.
“It is inevitable that the US dollar will have to go significantly higher while the Emperor is in place, but as soon as the clothes are gone it will fall. This could be one of the biggest market roller coasters of all time,” said Clifford Bennett, chief economist at ACY Securities, in a comment.
The US dollar was trading at 134.88 Japanese yen early Monday, down from 134.96 yen. The euro cost $1.0526 versus $1.0498.
US markets are closed on Monday for the June 16 holiday. But Federal Reserve Chair Jerome Powell’s monetary policy testimony before the Senate Banking Committee and House Financial Services Committee is slated for later this week.
Wall Street ended a difficult, meandering week slightly higher. The S&P 500 rose 0.2% to 3,674.84. The Dow Jones Industrial Average fell 0.1% to 29,888.78, while the Nasdaq Composite climbed 1.4% to 10,798.35.
The Russell 2000 index of smaller stocks rose 1% to 1,665.69.
Markets are preparing for a world of higher interest rates, led by the Federal Reserve move. Higher interest rates can lower inflation, but they also risk a recession by slowing the economy and pushing down the prices of stocks, bonds, cryptocurrencies, and other assets.
Last week, the Fed raised its short-term interest rate by three times the usual amount for the biggest hike since 1994. It may consider another such mega-hike at its next meeting in July. A report last week on the US economy also showed that industrial production was weaker than expected last month.
The yield on the 10-year government bond fell to 3.23% on Friday from 3.30% late Thursday.
In energy trading, benchmark US crude was down 36 cents to $109.20 a barrel. Brent crude, the international standard, fell 42 cents to $112.70 a barrel.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama