Asian shares rise in subdued holiday trading, as US futures jump
A currency trader gives a thumps up near the screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul. (AP Photo/Ahn Young-joon)
TOKYO, Japan — Asian shares advanced Thursday, with many markets in the region closed for Labor Day holidays. This was after US stocks stormed back from steep early losses to a seventh straight day of gains.
Uncertainty about what President Donald Trump’s trade war will do to the US economy remains a key focus for investors.
Japan’s benchmark Nikkei 225 rose 1.1 percent in afternoon trading to 36,447.26. Earlier in the day, the Bank of Japan decided to keep its benchmark interest rate unchanged as worries mount over the impact of Trump’s policies.
Australia’s S&P/ASX 200 edged up 0.2 percent to 8,145.6.
On Wednesday, the S&P 500 rose 0.1 percent, extending its winning streak to a seventh day, closing at 5,569.06. The Dow Jones Industrial Average added 0.3 percent to 40,669.36. The Nasdaq composite edged down by 0.1 percent to 17,446.34.
It was a stunning reversal after the S&P 500 dropped as much as 2.3 percent and the Dow fell 780 points in early trading.
Shares initially slid down
Stocks initially tumbled after a report suggested the US economy may have shrunk at the start of the year, falling well short of economists’ expectations. This is a sharp turnaround from the economy’s solid growth at the end of last year.
READ: US economy unexpectedly shrinks on import surge before Trump tariffs
Importers rushed to bring products into the country before tariffs could raise their prices. This helped drag on the country’s overall gross domestic product.
Such data raised the threat of a worst-case scenario called “stagflation.” It is when the economy stagnates yet inflation remains high.
Economists fear it because the Federal Reserve has no good tools to fix both problems at the same time. If the Fed were to try to help one problem by adjusting interest rates, it would likely make the other worse.
Some better news came later in the day when a report said the measure of inflation that the Fed likes to use slowed in March.
Inflation decelerated to 2.3 percent, closer to the Fed’s goal of 2 percent, from February’s reading of 2.7 percent.
Stocks began paring their losses almost immediately after the report.
If inflation keeps trending lower, it would give the Fed more leeway to cut interest rates in order to juice the economy.
Much of Wednesday’s economic data raised concerns about a weakening economy. A report on the job market from ADP suggested employers outside the government may have hired far fewer workers in April than economists expected, less than half.
READ: Eurozone economy grows more than expected in Q1 despite US tariff turmoil
It’s discouraging because a relatively solid job market has been one of the linchpins keeping the US economy stable. A more comprehensive report on the job market from the US government will arrive on Friday.
Wednesday’s reports add to worries that Trump’s trade war may drag the US economy into a recession.
The president’s on-again-off-again rollout of tariffs has created deep uncertainty about what’s to come. This could cause damage by itself.
“I’m not taking a credit or discredit for the stock market,” Trump said Wednesday. “I’m just saying we inherited a mess.”
Uncertainty triggered swings in shares trading
Uncertainty around Trump’s tariffs has already triggered historic swings for financial markets, from stocks to bonds to the value of the U.S. dollar, that battered investors through April.
The S&P 500 briefly dropped nearly 20 percent below its all-time high set earlier this year. Scary headlines at one point warned of the potential for the worst April since the Great Depression.
The S&P 500 ended April with a decline of just 0.8 percent, much milder than March’s. It’s now 9.4 percent below its record.
In the bond market, Treasury yields fell as investors ratcheted up their expectations for the Fed cutting interest rates. The yield on the 10-year Treasury eased to 4.17 percent from 4.19 percent late Tuesday.
In other dealings early Thursday, US benchmark crude shed 10 cents to $58.11 a barrel. Brent crude, the international standard gave up 4 cents to $61.02 a barrel.
The US dollar rose to 144.18 Japanese yen from 143.06 yen. The euro cost $1.1304, down from $1.1331.
