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Asian stocks fall as oil persists above $120 and the yen tumbles

Stocks were mostly down in Asia on Thursday as investors watched for further signs of inflation and crude oil prices hovered above $122 a barrel, adding to price pressures.

Benchmarks fell across the region except in Tokyo, where a weaker yen pushed up issuance from some Japanese exporters. Nintendo Co. issues jumped 1.9% in afternoon trading, while Honda Motor Co. shares gained more than 0.9%.

The Japanese yen recently fell to new 20-year lows against the US dollar, a trend the International Monetary Fund and other analysts expect to continue for some time due to higher interest rates. in the United States and Europe, compared to Japan, where long-term interest rates remain close to zero.

Read also | Dollar gains as US stocks fall, ECB move in sight

The dollar was trading at 133.80 Japanese yen after hitting 134 yen earlier in the day, from 134.20 yen on Wednesday night. The Euro traded at $1.0721, down from $1.0718.

The Governing Council of the European Central Bank will hold a monetary policy meeting later today.

Comments from Christine Lagarde, head of the European Central Bank, have markets pricing in an interest rate hike in July, with perhaps more to follow.

“Nevertheless, the economic recovery remains fragile and subject to downside risks related to geopolitical risks, erosion of real incomes, supply chain constraints and limited fiscal support,” said Venkateswaran Lavanya of the Department of Asia and Oceania Treasury of Mizuho Bank in Singapore.

To that end, the ECB will not want to throw the baby out with the bathwater, calibrating monetary tightening at a stronger, albeit slow, pace, she said in a commentary.

Watch | Oil hovers near 13-week high as China optimism backs price spike

Japan’s benchmark Nikkei 225 gained 0.2% in afternoon trade to 28,290.06. Australia’s S&P/ASX 200 slipped 1.2% to 7,037.10. The South Korean Kospi fell 0.4% to 2,616.46. Hong Kong’s Hang Seng fell 1.0% to 21,788.494, while the Shanghai Composite lost 1.1% to 3,228.08.

The impact of inflation has worsened since Russia’s invasion of Ukraine, which put increased pressure on energy and food prices. U.S. crude oil prices rose 2.3% on Wednesday and 63% for the year, while wheat prices rose 39% in 2022.

Supply chains have also tightened following a series of shutdowns for Chinese cities battling COVID-19 cases.

In energy trading, benchmark U.S. crude rose 29 cents to $122.40 a barrel. It gained $2.70 on Wednesday.

Brent, the international oil pricing standard, gained 35 cents to $123.93 a barrel.

Heightened inflationary pressure from the conflict in Ukraine and lockdowns in China prompted the Organization for Economic Co-operation and Development to revise its economic growth forecasts downward, following several other international groups, including the World Bank.

Read also | Pakistani rupee plunges to all-time low of 202.83 against the US dollar

Treasury Secretary Janet Yellen, testifying before the Senate Finance Committee on Tuesday, said she expects inflation to remain high and to be a top priority.

The Fed is widely expected to raise its main short-term interest rate by half a percentage point at its meeting next week.

It would be the second consecutive increase of double the usual amount, and investors are expecting a third in July.

Stocks fell sharply on Wall Street, erasing most of their gains for the week as investors were discouraged to see more evidence of inflation’s impact on businesses and a gloomy new outlook for the global economy.

The S&P 500 index fell 1.1% to 4,115.77. The Dow Jones Industrial Average lost 0.8% to 32,910.90 and the Nasdaq fell 0.7% to 12,086.27.

Small company stocks fell more than the rest of the market.

The Russell 2000 fell 1.5% to 1,891.01.

Bond yields rose. The yield on the 10-year Treasury, which banks use to set rates for mortgages and other loans, rose from 2.97% to 3.02% on Tuesday evening.

Big worries on Wall Street remain rising inflation and whether the Federal Reserve’s decision to aggressively raise interest rates will help soften the impact or possibly push the economy into a recession. .

The Fed’s goal is to slow economic growth enough to cushion the impact of inflation. Demand for goods exceeded supply and production capacity for most of the post-pandemic recovery.

But investors fear the Fed is going too far too fast in raising rates, pushing the US economy into a recession.

The next big inflation update comes on Friday, when the US government releases its latest reading on the Consumer Price Index.

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