Asian stocks after Wall St pullback on Fed inflation stance

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BEIJING (AP) — Asian stocks were mixed on Tuesday after Wall Street tumbled following the Federal Reserve’s pledge last week to fight inflation by keeping interest rates high.

Shanghai and Hong Kong fell while Tokyo and South Korea rose. Oil prices have fallen.

Wall Street’s benchmark S&P 500 index lost 0.7% on Monday, adding to last week’s losses.

Stocks fell after Fed Chairman Jerome Powell indicated on Friday that the U.S. central bank would stick to a rate-hike strategy to quell inflation that is at its highest in decades. That seemed to quell speculation that the Fed might relax amid signs of slowing economic activity.

“Markets are still digesting Jay Powell’s hard-hitting inflation message” while the European Central Bank is also giving “more hawkish” signals, Mizuho Bank’s Venkateswaran Lavanya said in a report.

The Shanghai Composite Index fell 0.5% to 3,225.10 and the Hang Seng in Hong Kong fell 0.9% to 19,851.86.

The Nikkei 225 in Tokyo gained 1.2% to 28,217.36 after July’s official unemployment rate held steady and the labor force participation rate, or share of age population to work who is employed, remained at a record high.

Seoul’s Kospi gained 1% to 2,450.71 and Sydney’s S&P-ASX 200 gained 0.7% to 7,013.40.

The Indian Sensex opened 1.1% higher at 58,609.22. New Zealand and Southeast Asian markets also grew.

On Wall Street, the S&P 500 fell to 4,030.61. On Friday, the benchmark index lost 3.4% in its biggest one-day decline in two months.

The Dow Jones Industrial Average fell 0.6% to 32,098.99. The Nasdaq composite fell 1% to 12,017.67.

The sale was widespread. Tech and healthcare stocks were the biggest decliners. Energy and utilities stocks rose.

Investors fear that rate hikes by the Fed and by central banks in Europe and Asia will derail global economic growth.

Fed officials point to the strength of the US labor market as evidence that the world’s largest economy can tolerate higher borrowing costs. Some acknowledge that a recession is possible, but say it might be necessary to extinguish runaway inflation.

The Fed has raised interest rates four times this year. The bottom two were 0.75 percentage points, three times his usual margin.

Some investors hoped that the Fed would relax if inflation subsided. This sentiment led to a rally in equities in July and early August.

Investors are expecting another big hike at the Fed’s September meeting, although the likelihood of such a hike is lower after weaker-than-expected retail sales in July.

The Fed’s favorite inflation gauge slowed last month, while other data show that consumer spending has slowed. Wall Street will receive several more economic updates this week.

In energy markets, benchmark U.S. crude fell 39 cents to $96.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract climbed from $3.95 on Monday to $97.01. Brent crude, the price basis for international trade, fell 66 cents to $102.27 a barrel in London. It jumped from $4.10 the previous session to $105.09.

The dollar fell to 138.49 yen from 138.83 yen on Monday. The euro fell from 99.92 cents to 99.99 cents.

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