Rates Rise, Inflation Pulls Asian Stocks, Pound Falls

TOKYO (AP) — Asian stocks fell and the pound fell further on Monday, reflecting pessimism about efforts by central banks around the world to rein in inflation.

Japan’s benchmark Nikkei 225 lost 2.6% to 26,462.48. Australia’s S&P/ASX 200 fell 1.5% to 6,479.30. The South Korean Kospi fell 3.1% to 2,219.75. Hong Kong’s Hang Seng fell 0.5% to 17,851.36, while the Shanghai Composite lost 0.6% to 3,069.65.

The pound’s fall against the US dollar accelerated last week after Britain’s new government announced plans to cut taxes and increase spending. The plan has raised concerns that increased government borrowing will deepen the country’s cost of living crisis.

The pound fell to $1.0349 to the US dollar early on Monday, but then rebounded to $1.0671, down 2.3%. It fell 3% on Friday.

Recent moves by the US Federal Reserve and other central banks around the world to raise interest rates are aimed at curbing high inflation for decades, but they also threaten a recession if rates rise too much or too quickly.

Wall Street ended last week with widespread selling, leaving the major indexes with their fifth loss in six weeks. Data on European business activity was discouraging, and a separate report suggested that US activity is also continuing to contract, although not as badly as in previous months.

The S&P 500 fell 1.7% on Friday to 3,693.23, its fourth consecutive decline. The Dow Jones, which at one point was down more than 800 points, lost 486.27 points, or 1.6%, to close at 29,590.41. The Nasdaq fell 1.8% to 10,867.93.

Smaller company stocks fared even worse. The Russell 2000 fell 2.5% to close at 1,679.59.

More than 85% of S&P 500 stocks closed in the red, with technology companies, retailers and banks among the largest weightings in the benchmark.

Last week, the Fed raised its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%. It was close to zero at the start of the year. The Fed also released a forecast suggesting that its benchmark rate could be 4.4% by the end of the year, one point higher than expected in June.

In energy trading on Monday, benchmark U.S. crude fell 84 cents to $77.90 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude oil prices fell 5.7% on Friday to their lowest levels since the start of this year on fears that a weaker global economy could consume less fuel.

Brent crude, the international standard, edged down 87 cents to $85.28 a barrel.

The recent appreciation of the US dollar against other currencies is of concern to many countries. This reduces the profits of American companies with operations abroad and puts financial pressure on much of the developing world.

When the dollar approached 146 yen last week, the Japanese government and the Bank of Japan intervened. The dollar has been trading at around 143 yen since then.

It rose slightly on Monday to 143.90 Japanese yen from 143.32 yen on Friday night. The euro cost 96.32 cents, down from 96.88 cents.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

Yuri Kageyama, Associated Press