Asian stocks mixed as Australia hikes interest rates


title=Golden

A forex trader walks past screens showing the Korea Composite Stock Price Index (KOSPI), left, and the exchange rate of the South Korean won to the US dollar, center, in the foreign exchange trading room of KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, May 3, 2022. Asian stocks are mixed in light ‘Golden Week’ trading with markets in China, Japan and some other countries closed for the holidays. (AP Photo/Ahn Young-joon)

PA

Asian stocks were mixed on Tuesday after Australia’s central bank raised its key interest rate for the first time since 2010.

Trading was light, with markets in mainland China, Japan and some other countries closed for the holidays.

Australia’s central bank raised its benchmark interest rate to 0.35% from 0.1%.

Investors are also expecting another rate hike by the US Federal Reserve as it and other central banks step up efforts to curb inflation. The central bank is expected to raise short-term interest rates to double the usual amount when it releases its latest statement on Wednesday. It has already raised its key overnight rate once, for the first time since 2018, and Wall Street expects several big hikes in the coming months.

It will make borrowing more expensive – for a car, a house, a credit card purchase and could weaken the economy. It would also attract investment from equities to other assets as their returns rise. Ultra-low interest rates helped push stocks to all-time highs during the pandemic and now that process is being reversed.

Australia’s S&P/ASX 200 fell 0.5% to 7,307.50 and shares also fell in Thailand and Taiwan.

Hong Kong’s Hang Seng rose 0.9% to 21,278.11 and South Korea’s Kospi rose 0.2% to 2,691.37.

On Monday, a late afternoon reversal led by tech stocks left major indexes slightly higher on Wall Street, avoiding more losses after a brutal April when a tech selloff dragged major benchmarks down.

The S&P 500 rose 0.6% to 4,155.38, while the Dow Jones Industrial Average gained 0.3% to 33,061.50. The Nasdaq climbed 1.6% to 12,536.02.

Smaller company stocks also reversed course after spending much of the day in the red. The Russell 2000 Index rose 1% to 1,882.91.

Bond prices fell, pushing yields higher. The 10-year Treasury yield was 2.98% after hitting 3.00% on Monday. It had not exceeded 3% since December 3, 2018, according to Tradeweb.

The uneven start to May follows an 8.8% slippage for the benchmark S&P 500 in April, led by Big Tech companies, which have started to look overvalued, especially with interest rates expected to sharply increase.

Just over half of S&P 500 stocks closed higher, with the technology and communications sectors driving much of the advance. Chipmaker Nvidia and Facebook parent company Meta Platforms each rose 5.3%.

The broader market often panders to the direction of technology stocks. Many companies in the sector have expensive stock values ​​and therefore have more strength to push the major indexes up or down.

Still, it’s unusual for tech stocks to rally at the same time bond yields rise. Indeed, higher yields make bonds increasingly attractive assets relative to riskier and more expensive stocks, especially those in technology and other growth-oriented companies.

US crude oil prices rose. EU energy ministers meet in Brussels to discuss Russian supply problems and sanctions. Russia’s invasion of Ukraine caused already high oil and natural gas prices to spike.

Benchmark U.S. crude oil fell 27 cents to $104.90 a barrel in electronic trading on the New York Mercantile Exchange. It gained 48 cents to $105.17 a barrel on Monday.

Brent crude fell 28 cents to $107.30 a barrel.

Concerns about rising inflation are weighing on the latest round of corporate earnings. This week will bring more, with Pfizer reporting results on Tuesday, CVS Health on Wednesday and Kellogg on Thursday.

In currency trading, the dollar was at 130.11 Japanese yen, down from 130.15 yen on Monday. The euro fell from $1.0505 to $1.0512.

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