Asian market mixed as investors keep wary eye on inflation, earnings

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TOKYO — Asian shares were mixed Tuesday, as investors weighed oil prices, inflation worries and corporate earnings.

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Investor sentiments were subdued after an early rally evaporated on Wall Street.

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“The news paints a deteriorating picture for the outlook of major companies amid global growth fears. Traders will be paying close attention to the ongoing earnings season for further signs of how companies are faring in a weakening economy,” said Anderson Alves, a trader at ActivTrades.

Japan’s benchmark Nikkei 225 NIK,
+0.68%
reversed early losses and added 0.8% in morning trading. Australia’s S&P/ASX 200 XJO,
-0.44%
slipped 0.3% and South Korea’s Kospi 180721,
-0.25%
dipped 0.3%. Hong Kong’s Hang Seng HSI,
-1.22%
dropped 1.2%, while the Shanghai Composite SCOMP,
-0.29%
fell 0.3%. Stocks rose in Indonesia JAKIDX,
+0.59%
but declined in Singapore STI,
-0.32%
and Taiwan Y9999,
-0.19%,

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Analysts say the Tokyo market is seeing some buying after a three-day weekend. Monday was a national holiday in Japan. Investors are playing catchup and so the rally may be short-lived. Among the issues picking up so far are Fast Retailing 9983,
+1.92%,
the group company for the Uniqlo clothing retail chain, as well as Sony Corp. 6758,
+2.63%,

The S&P 500 SPX,
-0.84%
fell 32.31 points, or 0.8%, to 3,830.85, after having been up 1% earlier. The index broke a five-day losing streak at the end of last week.

Gains in energy producers, big retailers and other companies that rely on consumer spending were outweighed by a pullback in health care and technology stocks.

The Dow DJIA,
-0.69%
slid 215.65 points, or 0.7%, to 31,072.61, and the Nasdaq comp,
-0.81%
gave up 92.37 points, or 0.8%, to 11,360.05.

Markets are likely to remain volatile through the upcoming earnings season. Johnson & Johnson JNJ,
-2.24%,
American Airlines AAL,
+0.48%
and Tesla TSLA,
+0.20%
are among the dozens of S&P 500 companies scheduled to issue quarterly snapshots this week.

The US market has been lurching mostly lower for weeks on worries that the Federal Reserve and other central banks will slam the brake too hard on the economy in hopes of bringing down high inflation. If they’re too aggressive with their interest-rate hikes, they could cause a recession.

A key report released last week indicated expectations are easing for inflation among households. That could prevent a more vicious cycle from taking root and ease the pressure on the Federal Reserve.

Expectations have come down for how aggressively the Federal Reserve will raise interest rates at its meeting next week. Traders are now betting on a roughly one-in-three chance for a monster hike of a full percentage point, with the majority favoring a 0.75-percentage-point increase. As recently as Thursday, the heavy bet was on a hike of a full point.

Economists at Goldman Sachs are among those forecasting a 0.75-point increase, which would match last month’s hike, instead of a more aggressive one. They cited in particular the softening of inflation expectations after Chair Jerome Powell said last month that the Fed pays close attention to them.

Later this week, investors expect the European Central Bank on Thursday to raise interest rates for the first time in 11 years to combat inflation. Many investors expect an increase of 0.25 percentage points, “but more is not unthinkable,” economists wrote in a BofA Global Research report.

Interest rates are one of the two main levers that set prices for stocks. The other is corporate profits, which are under threat given high inflation and slowdowns in parts of the economy. For the moment, at least, analysts are still forecasting continued growth.

In the bond market, the yield on the 10-year Treasury rose to 2.98% from 2.96% late Friday. The two-year yield, which rose to 3.17%, is still above the 10-year yield. Some investors see that as an ominous sign that could presage a recession in a year or two.

In energy trading, benchmark US crude CLQ22,
-0.21%
fell 20 cents to $102.40 a barrel. It rose 5.1% Monday. Brent crude BRNU22,
-0.34%
the international standard lost 34 cents to $105.93 a barrel.

In currency trading, the US dollar USDJPY,
-0.09%
edged up to 138.21 Japanese yen from 138.12 yen.

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Credit: www.marketwatch.com /

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