Asian shares follow Wall Street’s retreat on expected rate hikes

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TOKYO (AP) — Asian shares fell on Thursday, tracking a broad slide on Wall Street as investors braced for higher interest rates and inflation worries for some time.

Benchmarks fell in Tokyo, Sydney, South Korea and China. Japan’s benchmark Nikkei 225 was down 1.6 percent in afternoon trade at 27,655.35. Australia’s S&P/ASX 200 fell 1.8% to 6,861.70. South Korea’s Kospi fell 1.9 percent to 2,424.60. Hong Kong’s Hang Seng lost 1.7 percent to 19,622.87, while the Shanghai Composite fell 0.2 percent to 3,194.95.

The slide in the Nikkei came despite signs of an improving Japanese economy. A 17.6% improvement compared to the corresponding period of the previous year, a study by the Ministry of Finance on corporate financial statements for April-June showed.

“At some point central banks will find that inflation remains high despite rate hikes and they will stop. Unfortunately, for the economy on Main Street, this spot is too far away. It’s hard to see any near-term end to heightened consumer and business caution across Europe, China and the US,” said Clifford Bennett, chief economist at ACY Securities.

On Wall Street, the S&P 500 fell 31.16 points, or 0.8%, to 3,955, extending its losing streak for a fourth day. The index has fallen 17% so far this year. It ended the month down 4.2% after rising 9.1% in July.

The Nasdaq lost 66.93 points, or 0.6%, to 11,816.20, while the Dow shed 280.44 points, or 0.9%, to end at 31,510.43. The Russell 2000 index of smaller companies fell 11.48 points, or 0.6%, to 1,844.12.

Technology stocks and large retailers were among the biggest weights in the market. Only communications stocks rose slightly.

The latest setback for stocks came as bond yields rose broadly. The yield on the 10-year note, which influences rates on mortgages and other consumer loans, rose to 3.17 percent from 3.11 percent late Tuesday.

Bond yields are rising along with expectations of higher interest rates, which the U.S. Federal Reserve is raising in an effort to quell the highest inflation in decades.

“You now have the bond market taking the Fed seriously,” said Willie Delwiche, investment strategist at All Star Charts. “And it’s not that stocks can’t overcome that, but so far they haven’t.”

The last time stocks posted a big rally was in July and early August, when bond yields surpassed their highs as expectations for higher interest rates eased.

“If the underlying trend in stocks is lower, then higher bond yields affect that,” Delwiche said.

Wall Street worries that the Fed could push too hard on an already slowing economy and push it into recession. Higher interest rates also hurt investment prices, especially for more expensive stocks like technology companies.

Traders are now trying to get a better sense of how far and how fast the Fed’s rate hikes will go. The Fed has already raised interest rates four times this year and is expected to raise short-term rates by another 0.75 percentage points at its September meeting, according to CME Group.

Technology stocks and major retailers were among the market’s heaviest on Wednesday. Chipmaker Nvidia fell 2.4 percent and Best Buy fell 5.6 percent. Energy companies retreated as the price of US crude fell 2.3%. Occidental Petroleum slipped 1.4%.

Those losses kept gains in communications stocks and elsewhere in the market in check.

In energy trading, benchmark U.S. crude fell 60 cents to $88.95 a barrel. Brent crude, the international standard, fell $2.82 to $96.49 a barrel.

In currency trading, the US dollar rose to 139.31 Japanese yen from 139.04 yen. The euro was at $1.0022, up from $1.0054.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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