Stocks today: Asian stocks fall as Chinese economy triggers global slowdown

TOKYO (AP) — Asian shares fell on Wednesday amid encouraging data from China and worries about the future of the U.S. economy.

Japan’s benchmark Nikkei 225 was down 1.1% at 31,879.84 in morning trade. Australia’s S&P/ASX 200 dove 1.4% to 7,204.00. South Korea’s Kospi fell 1.2% to 2,539.48. Hong Kong’s Hang Seng fell 1.2% to 18,364.11, while the Shanghai Composite lost 0.7% to 3,153.43.

New Zealand’s central bank left its key interest rate unchanged at 5.5% on Wednesday. The Reserve Bank of New Zealand’s monetary policy committee said the core inflation rate had fallen, but core inflation remained very high. The group said it will take a long period of subdued spending to ease inflationary pressures. The New Zealand dollar was little changed on the news, trading at around US $0.6.

„The latest set of disappointing economic data from China is not encouraging for the region,” said Yip Jun Rong, market analyst at IG.

Clifford Bennett, chief economist at ACY Securities, believes the strong U.S. consumer spending is temporary and will run out of steam.

„It’s probably because of the big sales efforts that Amazon and big stores in general have had. All of that retail gain will completely disappear in August. Remember, we said it would be a strong result, but probably the last of good retail numbers for some time,” he said.

On Wall Street, the S&P 500 fell 1.2%. A deep slump for the world’s second-largest economy. The Dow Jones industrial average fell 361 points, or 1%, and the Nasdaq composite fell 1.1%.

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China’s economy was expected to grow sufficiently this year after the government lifted anti-Covid restrictions to shore up a global economy weakened by hyperinflation. But China’s recovery has been more faltering, unexpectedly cutting a key interest rate on Tuesday and skipping a report on how many of its younger workers are out of work.

Concerns about knock-on effects to the rest of the global economy weighed on Wall Street, where stocks were already down in August. Follows the gangbusters through the first seven months of the year, which critics have called overdone.

In the US, despite high interest rates, the economy is more resilient than expected. A report on Tuesday showed sales growth at U.S. retailers rose more than economists had expected in July.

„U.S. retail sales are charging ahead,” said Brian Jacobsen, chief economist at Annex Wealth Management. „Still, U.S. consumers are showing few signs of slowing.”

The strong retail sales report raises hopes that the U.S. economy will continue to grow and avoid a long-awaited recession. But to the downside for markets, it could also raise the Federal Reserve’s determination to keep interest rates high enough to fully dampen inflation.

The central bank has already raised its key interest rate to its highest level in more than two decades. Higher rates drag down the entire economy and affect prices for investments.

„Today’s numbers show that even if the Fed doesn’t raise them next month, rates will remain high for a long time,” said Mike Lowengard, head of model portfolio construction at Morgan Stanley’s global investment office.

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Treasury yields rose initially following the retail sales report, nearing their highest levels since the 2007-09 Great Recession, before rumbling up and down.

A faltering Chinese economy could mean lower demand for oil and other commodities. In energy trade, U.S. crude oil fell 7 cents to $80.92 a barrel. U.S. crude oil prices fell $1.52 to $80.99 a barrel on Tuesday. International benchmark Brent crude was down 7 cents at $84.82 a barrel.

Declines led to the biggest losses in energy producer stocks on the S&P 500. ExxonMobil’s 2.6% fall was one of the index’s heaviest weights.

Banks also fell, continuing a rocky run as several high-profile failures in the spring were caused in part by high interest rates.

Overall, the S&P 500 fell 51.86 points to 4,437.86. The Dow fell 361.24 to 34,946.39 and the Nasdaq was down 157.28 to 13,631.05.

In the bond market, the yield on the 10-year Treasury rose to 4.21% from 4.20% late Monday. It helps set rates for mortgages and other important loans.

The two-year Treasury yield fell to 4.94% from 4.97%, which more closely followed the Fed’s expectations.

In currency trade, the US dollar fell to 145.49 Japanese yen from 145.57 yen. The euro traded at $1.0908, up from $1.0904.

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Associated Press writer Nick Perry and AP business writer Stan Cho contributed to this report.

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