Asian stocks were mostly higher on Tuesday after strong selling on Wall Street put the Dow Jones Industrial Average in what is called a bear market.
US futures and oil prices rose. Tokyo, Sydney and Shanghai advanced while Hong Kong declined.
The week began with a sell-off amid a prolonged slump for many markets. The benchmark S&P 500 index is down more than 7% in September. But the buying began as investors awaited a series of updates on the US economy.
Tokyo’s Nikkei 225 index rose 0.5% to 26,571.87 and the S&P/ASX 200 added 0.4% to 6,496.20. In Seoul, the Kospi rebounded from earlier losses, advancing 0.1% to 2,223.86.
Hong Kong’s Hang Seng fell 0.2% to 17,816.77. The Shanghai Composite index jumped 1.4% to 3,092.76 after China’s central bank decided on Tuesday to maintain bank cash flow by buying securities from commercial banks, with an agreement to sell them back to the ‘coming.
The official Xinhua news agency said the People’s bank of china carried out 175 billion yuan (about $24.7 billion) in reverse repos “to maintain liquidity in the banking system”.
Global stocks slumped on worries about stubbornly high inflation and the risk that central banks could trigger recessions as they try to cool high prices for everything from food to clothes.
Investors were particularly focused on the Federal Reserve and its aggressive interest rate hikes. But the volatility in the foreign exchange markets further rattled the markets.
The pound fell to an all-time low against the dollar on Monday and investors continued to dump UK government bonds, unhappy with the sweeping tax cut plan announced in London last week.
The Japanese yen edged closer to 145 to the dollar on Tuesday morning. Last week, the Bank of Japan intervened in the market as the yen slipped past 145, getting a brief reprieve. But the soaring dollar against other currencies is putting pressure on the BOJ and other central banks, especially in developing economies facing rising costs to repay foreign loans.
The pound was at $1.0788, down from $1.0686 on Monday night. The dollar bought 144.29 yen, against 144.65 yen, and the euro rose to 96.48 cents against 96.10 cents.
Companies are nearing the end of the third quarter and with the next set of earnings reports, investors will have a better idea of how companies are handling persistent inflation.
Several economic reports are expected for this week that will provide more detail on consumer spending, the labor market and the broader health of the US economy.
The latest report on consumer confidence, for September, from the business group The Conference Board will be released on Tuesday. The government will release its weekly report on unemployment benefits on Thursday, along with an updated report on gross domestic product for the second quarter.
On Friday, the government will release another personal income and spending report that will help provide more detail on where and how inflation is hurting consumer spending.
Seeking to make borrowing more expensive and cut spending, the Fed raised its benchmark rate again last week, which affects many consumer and business loans. It is now in a range of 3% to 3.25%. It was close to zero at the start of the year. The Fed also released a forecast suggesting that its benchmark rate could be 4.4% by the end of the year, one point higher than expected in June.
The US economy is already slowing, raising fears that rate hikes could trigger a recession. The Dow was the last of the major U.S. stock indexes to fall into what is known as a bear market on Monday, falling 1.1% to 29,260.81.
The Dow Jones is now 20.5% below its all-time high set on January 4. A decline of 20% or more from a recent high is what Wall Street calls a bear market.
The S&P 500 fell 1% to 3,655.04. The Nasdaq fell 0.6% to 10,802.92.
Small company stocks fell more than the broader market. The Russell 2000 fell 1.4% to close at 1,655.88.
In other trading Tuesday, U.S. benchmark crude added $1.27 to $77.98 a barrel in electronic trading on the New York Mercantile Exchange. It sank $2.03 to $76.71 on Monday.
Brent crude, used to fix international oil prices, rose $1.34 to $84.20 a barrel.
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