BANGKOK — Asian shares slipped on Monday, with Chinese markets logging moderate losses after reopening from a weeklong holiday to news of a fresh set of lockdowns due to rising COVID-19 cases.
The declines followed yet another dismal end to the week on Wall Street as a strong U.S. jobs report added to worries the Federal Reserve might consider the higher-than-expected hiring data as proof the economy hasn’t slowed enough to get inflation under control. That might mean still more hefty rate hikes that could make a recession more likely.
A U.S. consumer prices report on Thursday will be one of the biggest factors for markets this week. Investors also are awaiting the latest updates on how companies are dealing with higher prices and interest rate hikes.
Markets were closed Monday in Tokyo, Taiwan and South Korea. The Hang Seng in Hong Kong fell 2.8% to 17,249.33 while the Shanghai Composite index shed 1.7% to 2,974.15.. Bangkok’s SET lost 1% and India’s Sensex gave up 0.2%.
Chinese cities were imposing more lockdowns and travel restrictions after the number of new daily COVID-19 cases tripled during a weeklong holiday, ahead of a major Communist Party meeting in Beijing next week.
China is one of the few places still resorting to harsh measures to keep the disease from spreading. The long-ruling Communist Party is particularly concerned as it tries to present a positive image of the nation in the run-up to a once-in-five-years party congress that starts Sunday. The strict “zero-COVID” approach has taken an economic toll, particularly on small businesses and temporary workers. Many in China hope the pandemic policy will ease after the meeting.
The dollar was trading at 145.25 Japanese yen from 145.34 late Friday, adding to pressure on Japan’s central bank to counter the yen’s prolonged slide by adjusting its policy of keeping its benchmark interest rate below zero to fend off deflation.
Prices have been rising in Japan, pushed higher mainly by global inflation and surging costs for oil and gas, but the Bank of Japan has stuck to its ultra-loose monetary policy while the Fed has pressed ahead with sharp rate hikes. The higher expected returns have pushed the dollar higher against the yen.
U.S. futures were lower. On Friday, the S&P 500 fell 2.8%, ending with a 1.5% gain for the week, its first weekly gain in four weeks. The Dow Jones Industrial Average skidded 2.1% , while the Nasdaq tumbled 3.8%. The Russell 2000 index fell 2.9%, to 1,702.15.
The government report showing employers hired more workers last month than economists expected might clear the way for the Fed to continue hiking interest rates aggressively, something that risks causing a recession if done too severely.
Employers added 263,000 jobs last month, less than the hiring pace of 315,000 in July, but still more than the 250,000 that economists expected.
Stocks have tumbled over 20% this year from record highs this year on worries about inflation, interest rates and the possibility of a recession.
By hiking interest rates, the Fed is hoping to starve inflation of the purchases needed to keep prices rising even further. The Fed has already seen some effects, with higher mortgage rates hurting the housing industry in particular. But if the rate hikes go too far, that could squeeze the economy into a recession. In the
Crude oil, meanwhile, had its biggest weekly gain since March. Benchmark U.S. crude jumped 4.7% to settle at $92.64 per barrel Friday. Brent crude, the international standard, rose 3.7% to settle at $97.92.
Oil prices have surged because big oil-producing countries have pledged to cut production in order to keep prices up. That should keep the pressure up on inflation, which is still near a four-decade high but hopefully moderating.
On Monday, the U.S. benchmark fell 36 cents to $92.28 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude gave up 45 cents to $97.47 a barrel.
Beyond higher interest rates, analysts say the next hammer to hit stocks could be a potential drop in corporate profits. Companies are contending with high inflation and interest rates eating into their earnings, while the economy slows.
The euro slipped to 97.32 U.S. cents from 97.36 cents.