Stocks open lower on Wall Street, continuing a weak patch | National Business
NEW YORK (AP) — Stocks mostly open lower on Wall Street and bond yields rose around the world after the Bank of Japan surprised investors by raising a cap on Japanese government bond yields. This move, which amounted to a rate hike, caused markets in Japan and the rest of Asia to fall and the yen to rise sharply against the dollar. Treasury yields rose sharply in the US. The S&P 500 was down 0.4% early Tuesday and the Nasdaq Composite was down 0.7%. The Dow Jones Industrial Average slipped 0.2%.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
US futures alternated between small gains and losses early Tuesday after the Bank of Japan surprised investors overnight by raising the cap on its 10-year bond yields.
The Bank of Japan made no mention of inflation in its policy statement, but said the move is intended to “improve the functioning of the market and encourage smoother formation across the yield curve, while maintaining accommodative financial conditions.”
Analysts interpreted the statement as an acknowledgment by the normally dovish Japanese that fighting inflation is now a priority there.
“The BoJ’s surprise move allowed it to take a small step away from the extremely dovish side of the monetary policy spectrum, where it had stood alone among major central banks all year,” wrote Jennifer Lee of BMO Economics in a note to clients. “It’s not joining the rate walkers out there, but it’s a little bit closer now.”
Dow Jones Industrials futures were essentially flat and S&P 500 futures were down 0.2%.
Bond yields rose globally, but stocks fell and the Japanese yen appreciated against the US dollar.
The Bank of Japan said it would allow the Japanese government bond yield curve to move 50 basis points either side of its 0% target, up from the previous 25 basis point limit. Tuesday’s change in policy will allow market rates to surge higher.
Among the major industrial nations, Japan was a holdout when it came to allowing yields to rise. Central banks in Europe and the US have raised interest rates aggressively to combat inflation.
The central bank introduced the previous caps in September 2016 to control its yield curve in hopes of lifting inflation closer to its 2% target after a long period of economic malaise and stagnant inflation.
Tokyo’s Nikkei 225 fell 2.5% to 26,568.03 after the announcement of the price change.
The Shanghai Composite Index slipped 1.1% to 3,073.76 after the World Bank cut its forecast for China’s economic growth this year to 2.7% from 4.3% in June. The bank led repeated shutdowns of major cities to combat outbreaks of COVID-19.
Hong Kong’s Hang Seng slipped 1.3% to 19,094.80 and Seoul’s Kospi slipped 0.8% to 2,333.29.
Sydney’s S&P-ASX 200 fell 1.5% to 7,024.03, while India’s Sensex gained 0.8% to 61,806.19. The New Zealand and Southeast Asian markets fell.
In midday trade in Europe, the FTSE in London rose 0.1%, while the DAX in Frankfurt and the CAC 40 in Paris each slipped 0.3% after falling more than a full 1% earlier.
Markets have been hit back in recent weeks and broadly for most of the year as central banks around the world continue to raise interest rates.
“The tone in the markets reflects a gloomy outlook for the global economy,” ActivTrades’ Anderson Alves said in a report.
On Monday, the S&P 500 fell 0.9% for the fifth day on a daily basis, as shares in communications services, technology companies and retailers fell.
The index slipped after the Fed said last week that interest rates may have to remain higher for longer than previously forecast. It’s down about 20% this year, with less than two weeks left in 2022.
The Dow Jones Industrial Average fell 0.5%. The Nasdaq Composite lost 1.5%.
The Fed raised its short-term interest rate by half a percentage point last week, for its seventh hike this year. This disappointed investor is hoping the Federal Reserve may ease rate-hike plans as data shows a slowdown in economic activity.
The federal funds rate is at a 15-year high of 4.25% to 4.5%. The Fed forecasts it to reach a 5% to 5.25% range by the end of 2023. The forecast does not envisage a reduction before 2024.
Investors await US economic reports this week for an update on the inflation path. It has fallen from its high of 9.1% in June but was still at 7.1% in November.
The National Association of Realtors reports November home sales on Wednesday. Also on Wednesday, the Conference Board will release its December consumer confidence report.
On Friday, the US government will report consumer spending for November. The report is viewed by the Fed as an inflation barometer.
In energy markets, US crude, the benchmark in electronic trading on the New York Mercantile Exchange, gained 77 cents to $75.96 a barrel. Brent crude, the price basis for international oil trading, rose 47 cents to $80.27 a barrel in London.
The dollar fell to 132.47 yen from 136.99 yen on Monday. The euro rose to $1.0613 from $1.0604.
McDonald reported from Beijing; Ott reported from Washington.