HONG KONG: Stocks were mixed in Asia on Friday as soaring inflation and a series of interest rate hikes around the world continued to fan recession fears, while a big miss on Chinese growth added to anxiety about the world’s biggest economies.
Below-par earnings from JP Morgan and Morgan Stanley compounded worries that companies’ profits would be hit by the fallout from a number of issues including rising prices, monetary policy tightening and the war in Ukraine.
After rate hikes by several countries this week, investors expect the Federal Reserve to lift rates this month by 75 basis points as officials battle decades-high inflation, though some observers suggest a one-percentage-point move could even be on the cards.
The latest outsized US inflation print this week — caused by a spike in energy prices — followed last Friday’s strong US jobs data, giving the Fed room to continue its campaign to suck cash out of the financial system.
While experts warn that raising rates risks hammering the economy, the bank has made it clear its number-one priority is bringing down prices.
This has sent the dollar racing across the board, and Steve Englander at Standard Chartered Bank warned there was no end in sight for its advance.
The currency’s strength is “largely a flight to safety”, he told Bloomberg TV.
“The problem is until we get to see some light at the end of the tunnel with respect to either inflation coming off or oil prices coming off because of supply creation rather than demand destruction, it’s hard to call a top to it.”
With investors increasingly pricing in a recession next year, equities are struggling to recover.
US markets mostly fell, with sentiment weighed by the disappointing reports from JPMorgan Chase & Co. and Morgan Stanley. They will be followed over the next few days by Citigroup, Goldman Sachs and Bank of America.
Hong Kong and mainland Chinese markets led Asian losses after data showed China’s economy grew just 0.4 percent in the second quarter as it was battered by Covid lockdowns in major cities including Shanghai and Beijing.
The reading was well off the 1.6 percent predicted by analysts in an AFP survey, though there was speculation that it will pressure authorities to unveil new stimulus measures.
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