TOKYO – Asian markets were mostly cautious on Monday ahead of the US federal holiday.
Concerns about inflation and the risk of a global recession as central banks struggle to contain them overtook Wall Street’s positive close on Friday.
The price of the world’s most popular cryptocurrency fell below the psychological benchmark of $20,000 to $20,742 early Monday. Bitcoin fell nearly 10% to below $18,600 over the weekend, according to crypto news site CoinDesk.
In the afternoon in Tokyo it was $19,837.14.
Stocks fell in most major Asian markets but edged up in China, which, as widely expected, left its 1-year and 5-year interest rates unchanged.
With China struggling to bring the outbreak under control and its already faltering economy, “rate cuts are likely in the coming months as we anticipate an economic recovery amid COVID-zero policies.” will be slow. After this interest rate stagnation, the government should continue to provide fiscal stimulus,” said Iris Pang, chief economist at ING Greater China, in a comment.
Japan’s benchmark Nikkei 225 slipped 1.7% to 25,534.68 in morning trade. Australia’s S&P/ASX 200 slipped 0.7% to 6,432.00. South Korea’s Kospi fell 2.1% to 2,389.69. Hong Kong’s Hang Seng was up 0.2% to 21,109.16, while the Shanghai Composite was up less than 0.1% to 3,317.69.
China and Japan, two of the world’s three largest economies, do not participate in rate hikes.
Last week, the Bank of Japan stuck to its zero interest rate policy, although comments from Bank of Japan Governor Haruhiko Kuroda were dismissed as hinting at what Tokyo might do about the weakening yen.
A weak currency could help gains from Japan’s export giants like Toyota Motor Corp, but could also signal a weak economy.
Kuroda expressed concern about the lower yen and its impact on Japanese companies, but said he has no immediate plans to change monetary policy. This means a widening gap between interest rates and returns on investments in Japan and the US, and the dollar continues to strengthen.
“It is inevitable that the US dollar will appreciate significantly while the monarch is in power, but once the clothing shortages show, it will decline. This will be one of the biggest market roller coaster opportunities of any market at any time. Might be one of them,” said Clifford Bennett, chief economist at ACY Securities, in a comment.
The US dollar was trading at 134.88 Japanese yen in the early hours of Monday, down from 134.96 yen. The euro price is $1.0526 versus $1.0498.
US markets are closed on Monday for the June 20 holiday. But Federal Reserve Chair Jerome Powell’s testimony on monetary policy before the Senate Banking Committee and House Financial Services Committee is slated for later this week.
Wall Street ended a difficult week, nothing more. The S&P 500 rose 0.2% to 3,674.84. The Dow Jones Industrial Average fell 0.1% to 29,888.78, while the Nasdaq Composite climbed 1.4% to 10,798.35.
The Russell 2000 index of smaller stocks rose 1% to 1,665.69.
Markets are bracing for a world of high interest rates, led by the Federal Reserve’s decision. Higher interest rates can dampen inflation, but they can also increase recession risk by slowing the economy and lowering the prices of stocks, bonds, cryptocurrencies, and other assets.
Last week, the Fed raised its short-term interest rate to three times the normal amount, the largest increase since 1994. It could consider another hike that big at its next meeting in July. A report on the US economy last week also showed that industrial production was weaker than expected last month.
The 10-year government bond yield rebounded to 3.23% on Friday, from 3.30% late Friday.
Benchmark US crude fell 36 cents in energy trading to $109.20 a barrel. Internationally, Brent crude fell 42 cents to $112.70 a barrel.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
After that, Asian markets mostly appeared ahead of the US holiday in The Associated Press.