TOKYO (AP) – Asian shares displayed a mixed performance on Thursday, as the momentum from Wall Street's recent rally faded following two potentially discouraging economic reports from the United States. U.S. futures experienced a slight decline, accompanied by a decrease in oil prices.
In Japan, the benchmark Nikkei 225 index decreased by 0.2% to close at 37,658.46. Meanwhile, Australia’s S&P/ASX 200 saw a minor decline of nearly 0.1%, finishing at 8,535.10. In contrast, South Korea’s Kospi index surged by 2.1% to reach 2,829.48, stimulated by the advent of newly elected President Lee Jae-myung, who has promised to reignite discussions with North Korea and enhance trilateral relations with the U.S. and Japan.
Other markets in Asia showed a mix of results; Hong Kong’s Hang Seng index rose by 0.9% to 23,856.54, while the Shanghai Composite remained relatively unchanged, slipping less than 0.1% to 3,374.30.
On Wednesday, the S&P 500 index ended the trading day nearly flat at 5,970.81, remaining 2.8% below its peak. The Dow Jones Industrial Average saw a slight decrease of 0.2% to close at 42,427.74, while the Nasdaq composite index gained 0.3%, concluding at 19,460.49.
The bond market experienced more significant action, with Treasury yields dropping sharply in response to disappointing economic indicators. One report indicated a contraction in activity within the U.S. retail, finance, and services sectors, diverging from economists' expectations for growth. The Institute for Supply Management's survey revealed that businesses were struggling to anticipate the future amidst ongoing uncertainties created by tariffs.
Another report from ADP highlighted that U.S. employers outside the government hired significantly fewer workers than anticipated last month, raising concerns ahead of the more comprehensive jobs report expected from the U.S. Labor Department. The job market has remained quite robust despite ongoing challenges, but any signs of weakness could undermine broader economic stability.
As a result of the economic reports, traders began to speculate that the Federal Reserve might have to lower interest rates later this year to support economic growth. This speculation contributed to the decline in Treasury yields. Interestingly, President Trump took to his Truth Social platform urging Fed Chair Jerome Powell to swiftly implement rate cuts, stating, “Too Late. Powell must now LOWER THE RATE. He is unbelievable!!!”
This year, the Federal Reserve has refrained from reducing interest rates after having slashed them in previous years. Part of the reasoning behind this pause is the desire to assess the impact of Trump's tariffs on the economy and inflation. Although lower interest rates could stimulate economic activity, they also risk exacerbating inflation further.
Longer-term Treasury yields have risen in recent weeks due to factors beyond the Federal Reserve’s influence, as investors demand higher interest from the U.S. government to borrow, amid fears of it accumulating trillions in debt from ongoing tax cut discussions in Congress.
Investors remain hopeful for negotiations that might reduce Trump's tariffs, but the situation is uncertain. Maroš Šefčovič, the European Union’s chief trade negotiator, engaged in discussions with U.S. Trade Representative Jamieson Greer on the sidelines of a meeting for the Organisation for Economic Cooperation and Development.
In the bond market, the yield on the 10-year Treasury note fell to 4.35% from 4.46% late Tuesday, while the two-year Treasury yield, which aligns closely with investors' expectations regarding Federal Reserve interest rate moves, eased to 3.86% from 3.96%.
Turning to commodity markets, benchmark U.S. crude oil prices decreased by 8 cents to $62.77 per barrel, while Brent crude, the international standard, saw a slight increase of 1 cent, reaching $64.87 per barrel. In currency exchanges, the U.S. dollar rose against the Japanese yen, trading at 142.87 yen compared to 142.78 yen the previous day. The euro remained relatively stable, costing $1.1413, slightly down from $1.1418.
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AP Business Writer Stan Choe contributed.
Yuri Kageyama, The Associated Press
