Asian Shares Decline Following Wall Street Drops Despite Strong U.S. Economic Data

HONG KONG (AP) — Asian markets traded lower on Wednesday as shares on Wall Street experienced a slump, even though the U.S. reported better-than-expected data regarding job opportunities and business activity.

In the U.S., futures and oil prices showed an upward trend.

Japan’s main stock index, the Nikkei 225, remained unchanged at 40,079.09. The Japanese yen weakened against the dollar, now valued at 158.19 yen, compared to 158.06 earlier.

Hong Kong’s Hang Seng index decreased by 1.6% to 19,137.88, while the Shanghai Composite index fell by 1.5% to 3,182.49. Notably, shares from Tencent experienced a decline of 2.1%, and shares in CATL, the largest battery manufacturer worldwide, dropped 1.4%. This downturn follows their inclusion in a list from the U.S. Defense Department, which connected them to China’s military.

The world's second-largest economy faces increasing uncertainty as potential tariffs and shifts in policy are anticipated following the inauguration of U.S. President-elect Donald Trump on January 20.

Meanwhile, in South Korea, the Kospi index rose by 1.2%, reaching 2,522.75, while Australia’s S&P/ASX 200 saw a gain of 0.7% at 8,348.60.

On the previous day, the S&P 500 index in the U.S. dropped by 1.1%, closing at 5,909.03 after initially starting on a positive note. The Dow Jones Industrial Average saw a decrease of 0.4% to 42,528.36, while the Nasdaq composite tumbled by 1.9% to 19,489.68.

This decline in stocks was influenced by rising yields in the bond market, which surged following positive reports about the economy. One report indicated that U.S. employers had more job openings than expected at the end of November, while another highlighted stronger-than-anticipated growth in the finance, retail, and service sectors for December.

While these reports suggest good news for job seekers and those concerned about a potential recession, a robust economy may also maintain inflationary pressures. Consequently, this could lead to the Federal Reserve being less inclined to reduce interest rates, which is a prospect that typically excites Wall Street.

The Federal Reserve initiated cuts to its main interest rate in September aimed to support the economy, but there are hints suggesting a slowdown in this easing process. Additionally, concerns over tariff implications from President-elect Trump have sparked worries about further inflation pressures, which currently hover just above the Fed's 2% target.

Moreover, the U.S. services sector report from the Institute for Supply Management revealed concerning inflation trends, indicating a rise in price increases during December.

Anticipations for fewer interest rate cuts in 2025 have been steadily building, pushing long-term Treasury yields upward. Concerns over Trump’s possible tax cuts, which could exacerbate the U.S. government’s debt, have also contributed to this trend.

As Treasury yields rise, they become more appealing compared to stocks, which exerts downward pressure on equity prices. For instance, the yield on a 10-year Treasury bond climbed to 4.69%, up from 4.63% shortly before the latest reports, and it has notably increased from just 4.15% in early December.

With worries about a slowing U.S. economy dissipating, and the yield firmly above 4.50%, market experts believe that the situation is shifting to a phase where "good news might translate to bad news for the market," as suggested by analysts from Bank of America.

The focus now shifts to an upcoming U.S. job market update on Friday, which economists predict will indicate a slowdown in hiring. The estimated growth for December stands at 156,500 jobs, according to FactSet.

In the energy sector, benchmark U.S. crude oil prices increased by 37 cents to reach $74.62 per barrel, while Brent crude, the international standard, saw a rise of 29 cents, totaling $77.34 per barrel.

On the currency exchange, the euro rose to $1.0347, up from $1.0341.

Asian, Stocks, Economy