Asian markets mixed after Wall Street’s biggest retreat of the year

TOKYO — Asian shares were trading mixed Thursday, as investors grew cautious after Wall Street’s biggest pullback of the year.

Japan’s benchmark Nikkei 225
NIK,
-1.44%

slipped 1.5%. Australia’s S&P/ASX 200
XJO,
+0.57%

gained 0.5% and South Korea’s Kospi
180721,
+0.51%

added 0.2%. Hong Kong’s Hang Seng
HSI,
-0.32%

was nearly unchanged, while the Shanghai Composite
SHCOMP,
+0.49%

rose 0.1%. Stocks rose in Indonesia
JAKIDX,
+0.65%

but fell in Singapore
STI,
-0.42%
.
Taiwan markets were closed.

In a bit of positive news, data from the Japan National Tourism Organization showed that tourist and other kinds of travel to Japan from Asia outside China had recovered last month.

Visitors totaled 1.37 million people in December, about the same level as December in 2020, according to the data. But more time is needed before such numbers return to pre-COVID-19 levels, a report from SMBC Nikko said.

“On the macro front, there remains lingering uncertainties about the outlook for the global economy. A slew of disappointing U.S. data releases and hawkish Fed rhetoric are also adding to the risk-off mood across markets,” said Anderson Alves, trader at ActivTrades.

The S&P 500
SPX,
-1.56%

fell 1.6% to 3,928.86 after having been up as much as 0.6% in the early going. The Dow Jones Industrial Average
DJIA,
-1.81%

lost 1.8% to 33,296.96 and the Nasdaq composite
COMP,
-1.24%

slid 1.2%, ending a seven-day winning streak, to 10,957.86. The losses are reversal for the market, which kicked off the year with a two-week rally.

The selling came as new economic data showed that as inflation cools, the economy is slowing, heightening worries about the possibility of a recession. Meanwhile, a key Federal Reserve policymaker said interest rates need to go higher than the central bank signaled earlier.

The government reported Americans cut back on their spending at retailers more than anticipated last month, the second straight decline. Separately, the Federal Reserve said U.S. industrial production, which covers manufacturing, mining and utilities, fell in December much more than economists had expected.

The government also reported more encouraging inflation data. Wholesale prices rose 6.2% in December from a year earlier, a sixth straight slowdown for the measure of prices before they are passed along to consumers.

Investors have been hoping that easing inflation and a slowdown in economic growth might influence the Federal Reserve’s position on interest rates. The central bank aggressively raised rates throughout 2022 in an effort to cool hot inflation, but that has hurt prices of stocks and bonds, and risks going too far and bringing on a recession.

While there’s growing evidence that high inflation is finally easing, further rate hikes are still needed, according to Loretta Mester, president of the Federal Reserve Bank of Cleveland.

“I still see the larger risk coming from tightening too little,” Mester said in an interview Tuesday with The Associated Press.

Mester stressed her belief that the Fed’s key rate should rise a “little bit” above the 5% to 5.25% range that policymakers have collectively projected for the end of this year. It has raised its key overnight rate to a range of 4.25% to 4.50% from roughly zero a year ago. The Fed will announce its next decision on interest rates Feb. 1. Investors are largely forecasting a raise of just 0.25 percentage points next month, down from December’s half-point hike and from four prior increases of 0.75 percentage points.

The broader economic picture is still not clear enough to see whether the Fed’s fight against inflation is working well enough to avoid a recession. Several major banks have forecast at least a mild recession at some point in 2023.

In energy trading Thursday, U.S. benchmark crude
CLG23,
-0.87%

fell $1.25 to $78.23 a barrel in electronic trading on the New York Mercantile Exchange. It fell 70 cents to $79.48 per barrel on Wednesday.

Brent crude
BRNH23,
-0.62%
,
the international pricing standard, lost $1.10 to $83.88 a barrel.

In currency trading, the U.S. dollar
USDJPY,
-0.57%

declined to 128.00 Japanese yen from 128.87 yen.

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