NEW YORK – Markets were mixed as oil prices fell and the dollar weakened after disappointing US data renewed concerns about a slowdown in the world’s largest economy.
The optimism that had flowed through trading floors since the beginning of the year took a beating this week as concerns about inflation and rising interest rates were replaced by fears of growth and impact on business profitability.
Neutral sentiment expects China’s economy to recover strongly this year – after suffering its worst annual growth in 46 years in 2022 – after stepping back from its policy zero-Covid.
Wall Street’s three main indexes all fell more than 1 percent on Wednesday in response to the retail sales figures, and fell the fastest in more than a year, while producer prices the largest decline since the beginning of the pandemic.
Industrial production was also worse than expected.
While data suggesting the economy is struggling in recent months has boosted equities on hopes the Federal Reserve will slow interest rate hikes, analysts say they are concerned about the outlook. today’s marketers are economical.
“‘Bad news is bad news’ again for the market, with weak retail sales and industrial production seeing risk assets sell off,” National Australia Bank’s Tapas Strickland said.
The data “adds to the theme of the economy slowing down and heading for a recession in 2023, and a return to the soft narrative that has dominated the market since January”.
Optimism for Asia
Tokyo, Hong Kong, Singapore, Mumbai and Manila all fell, although Shanghai, Sydney, Seoul, Bangkok and Jakarta outperformed.
Wellington’s NZX 50 and the New Zealand dollar suffered only minor losses despite Prime Minister Jacinda Ardern’s announcement that she will resign next month, saying she does not have “enough he’s in the tank” anymore.
London, Paris and Frankfurt opened in the red.
Hopes that US interest rates will not rise further than previously feared weighed on the greenback, with the yen retreating sharply to below 128 per dollar after the Bank of Japan’s decision on Wednesday will not adjust the monetary policy.
“With the Fed nearing the end of its interest rate hike cycle, and the Bank of Japan still beginning its tightening regime, the dollar-yen bottom line could be a move towards 120 and possibly lower next week,” said Michael Hewson at CMC Markets.
However, many Federal Reserve officials have disputed such estimates, warning that they will continue to tighten policy until they lower the cost of living from a decade high.
Concerns about a recession have weighed on oil prices, despite hopes of a pick-up in demand as China reopens to the world. Both major contracts were down around one percent in afternoon trade.
But SPI Asset Management’s Stephen Innes says Asian investors could be in for a good year.
“The clear message to start 2023 is as clear as a whistle: if last year it was about the tightening of the Fed and the ECB, this year it will be about the normalization of China and Japan, which should continue to raise the wealth of Asia higher in 2023,” he said in a Note.