Asian shares mixed after Wall St dips on weak economic data

By YURI KAGEYAMA
AP Business Writer

TOKYO (AP) — Asian shares were trading mixed Wednesday following a decline on Wall Street after reports on the U.S. economy came in weaker than expected.

Japan’s benchmark Nikkei 225 lost 1.7% in afternoon trading to 27,808.75. Australia’s S&P/ASX 200 stood little changed, inching down less than 0.1% to 7,232.60. South Korea’s Kospi added 0.5% to 2,493.83. Trading was closed in Hong Kong and Shanghai for the Qingming Festival, a holiday.

New Zealand’s benchmark fell 0.3% after the central bank surprised economists by imposing an aggressive half-point rate rise to bring its policy interest rate to 5.25%. It was the Reserve Bank of New Zealand’s 11th straight rate hike as it tries to cool inflation, which is running at 7.2%, far above the bank’s target level of around 2%.

Central banks have diverged somewhat in adjusting interest rates to reflect the latest trends in their economies. On Tuesday, Australia’s central bank kept its rate at 3.6%, citing a need for time to assess where the economy is headed as inflation moderates.

On Wall Street, the S&P 500 dropped 0.6% to 4,100.60, breaking a four-day winning streak. The Dow Jones Industrial Average fell 0.6%, to 33,402.38. The Nasdaq composite sank 0.5% to 12,126.33.

Investors are still split on whether the U.S. economy will fall into a recession and how badly corporate profits might drop. The biggest question remains what the Federal Reserve will do next with interest rates after hiking them furiously over the last year to get high inflation under control.

The reports on job openings and factory orders released Tuesday may have heightened recession fears. But they may also give the Fed reason to hold rates steady at its next meeting, for the first time in more than a year, offering a possible upside for markets.

One report showed employers advertised 9.9 million job openings in February, a sharper fall-off than economists expected. The Fed has been paying close attention to the numbers because the job market has remained so strong despite higher rates. The hope is that a softening in the number of openings could take some pressure off inflation without having to throw many people out of work.

A separate report showed that factory orders weakened in February more than economists expected.

A potentially more impactful report will arrive with Friday’s update on how many jobs were created across the country last month.

Traders flipped bets back toward the Fed holding steady on rates at its meeting next month. A day earlier, a slight majority was betting on another increase in rates. That helped yields in the bond market to fall.

The yield on the 10-year Treasury fell to 3.34% from 3.42% late Monday. It helps set rates for mortgages and other important loans. The two-year Treasury, which moves more on expectations for the Fed, dropped to 3.82% from 3.97%.

Longer term, there seems to be more confidence on Wall Street that the Fed will have to cut rates later this year.

Tuesday’s weaker-than-expected readings on the economy follow a report on Monday that showed U.S. manufacturing continues to shrink faster than economists forecast.

On Wall Street, shares of Virgin Orbit plunged 23.2% to 15 cents after the company filed for Chapter 11 bankruptcy protection. It’s been contending with the fallout of a failed mission this year and increasing difficulty in raising funding for future missions.

Stocks in industries whose profits are closely tied to the strength of the economy also fell more than the rest of the market, such as industrial and energy companies. Valero Energy fell 8% for one of the biggest losses in the S&P 500.

In other trading Wednesday, benchmark U.S. crude gained 33 cents to $81.04 a barrel in electronic trading on the New York Mercantile Exchange. It rose 29 cents to $80.71 per barrel on Tuesday. Brent crude, the international standard, rose 40 cents to $85.34 per barrel in London.

The U.S. dollar slipped to 131.52 Japanese yen from 131.71 yen. The euro cost $1.0954, up from $1.0951.