June 5, 2024 – Asian stock markets showed a mixed performance on Wednesday as investors weighed recent data indicating a slowing U.S. economy, presenting both opportunities and challenges for Wall Street.
Japan’s Nikkei 225 fell 1.0% in early trading to 38,448.61. In contrast, Australia’s S&P/ASX 200 edged up 0.3% to 7,759.20, South Korea’s Kospi surged 1.2% to 2,695.02, and Hong Kong’s Hang Seng climbed 1.2% to 18,659.24. The Shanghai Composite dipped nearly 0.1% to 3,088.18.
Analysts suggest that recent wage growth data in Japan could lead to more pronounced results once the outcomes of the spring labor negotiations are implemented. This development increases the likelihood of the Bank of Japan raising interest rates.
On Tuesday, the S&P 500 ticked up by 0.2% to 5,291.34, despite more stocks within the index falling than rising. The Dow Jones Industrial Average rose 0.4% to 38,711.29, and the Nasdaq Composite added 0.2% to 16,857.05.
The bond market saw more significant action, with Treasury yields sliding after a report showed U.S. employers advertised fewer job openings at the end of April than expected.
Wall Street hopes for a slowdown in the job market and overall economy to control inflation and prompt the Federal Reserve to cut interest rates, which would ease financial market pressures. Following the report, traders increased their expectations for rate cuts later this year, according to CME Group data. However, there is a risk that the economy might slow too much, leading to a recession, layoffs, and weakened corporate profits, which could drag stock prices lower.
Tuesday’s report indicated that U.S. job openings at the end of April dropped to the lowest level since 2021. Bill Adams, chief economist for Comerica Bank, described the numbers as a return to a “normal job market” following the COVID-19 pandemic’s disruptions.
However, this followed Monday’s report showing U.S. manufacturing contracted in May for the 18th time in 19 months. Concerns about a slowing economy have impacted crude oil prices, suggesting reduced growth in fuel demand. U.S. crude oil has dropped nearly 5% this week, returning to prices seen four months ago, leading to significant losses for oil-and-gas stocks. Halliburton, for example, dropped 2.5%.
Early Wednesday, benchmark U.S. crude lost 2 cents to $73.23 a barrel, while Brent crude, the international standard, added 3 cents to $77.55 a barrel.
Companies with profits tied closely to economic cycles also experienced sharp losses. Copper and gold miner Freeport-McMoRan fell 4.5%, and steelmaker Nucor declined 3.4%.
The Russell 2000 index, which comprises smaller companies that perform best when the U.S. economy is strong, fell 1.2%.
Elsewhere on Wall Street, Bath & Body Works tumbled 12.8%, marking the worst loss in the S&P 500 despite exceeding revenue and profit expectations. GameStop, after a significant gain the previous day, dropped 5.4%.
Dividend-paying stocks fared better, benefiting from lower interest rates as income-seeking investors turned to real-estate investment trusts, utilities, and other high-dividend stocks. Camden Property Trust rose 2.6%, and Mid-America Apartment Communities increased by 2.1%.
Some Big Tech stocks continued to drive the market higher. Nvidia, bolstered by the excitement around artificial-intelligence technology, rose 1.2%, significantly pushing the S&P 500 upward.
Additionally, the U.S. dollar strengthened to 155.38 Japanese yen from 154.84 yen. The euro remained nearly unchanged at $1.0884.
