TOKYO — Asian shares declined Wednesday after stocks tumbled on Wall Street as worries persist about higher interest rates and their tightening squeeze on the global economy.
Tokyo’s benchmark Nikkei 225 dipped 1.4% in afternoon trading to 27,102.21. Australia’s S&P/ASX 200 slipped 0.3% to 7,314.50. South Korea’s Kospi dropped 1.6% to 2,419.15. Hong Kong’s Hang Seng slipped 0.3% to 20,461.32, while the Shanghai Composite shed 0.6% to 3,287.64.
New Zealand’s central bank raised its benchmark interest rate by a half-point to 4.75% to try to wrestle down inflation. The increase, which can raise the borrowing costs for consumers on everything from credit cards to mortgages, comes despite widespread economic pain from a devastating cyclone.
Higher rates hurt investment prices and raise the risk of a recession by slowing business investment and consumer spending.
U.S. employment and consumer spending have weathered higher interest rates well, but a report Tuesday showed sales of previously occupied homes slowed to their slowest pace in more than a decade. The mixed signals leave investors wondering if the Fed will ease back on rate hikes or resume a more aggressive stance.
“Amid the evolving new narrative of stronger US growth, payrolls, retail sales, and the additional Fed response required to tame the rude health of the US economy, investors are beginning to think the hawkish Fed may not have entirely run its course yet,” Stephen Innes of SPI Asset Management said in a commentary.
The S&P 500 fell 2% to 3,997.34 on Tuesday for its sharpest drop since the market was selling off in December. The Dow Jones Industrial Average lost 697 points, or 2.1%, to 33,129.59 while the Nasdaq composite sank 2.5% to 11,492.30.
Home Depot fell to one of the market’s larger losses after giving financial forecasts that fell short of Wall Street’s expectations. It dropped 7.1% despite reporting stronger profit for the last three months of 2022 than expected.
The retailer said it would spend $1 billion to increase wages for hourly U.S. and Canadian workers. That fed into broader worries for markets that rising costs for companies have been eating into profits, which are one of the main levers that set stock prices.
Rates and stock prices are high enough that strategists at Morgan Stanley say U.S. stocks look to be more expensive than at any time since 2007.
The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, leaped further to 3.95% from 3.82% late Friday. The two-year yield, which moves more on expectations for the Fed, rose to 4.72% from 4.62%. It’s close to its highest level since 2007.
Yields have shot higher this month as Wall Street ups its forecasts for how high the Federal Reserve will take short-term interest rates in its efforts to stamp out inflation. The Fed has already pulled its key overnight rate up to a range of 4.50% to 4.75%, up from basically zero at the start of last year.
The worry is that the Fed could ratchet up its forecasts for rates further next month when it releases its latest projections for the economy. Besides showing more strength in the job market and retail sales than expected, recent reports have also suggested inflation is not cooling as quickly and as smoothly as hoped. Investors are also pushing back their forecasts for when the first cut to rates could happen.
Those worries have caused the strong rally by Wall Street early in the year to stall. Having risen as much as 8.9%, the S&P 500 is now clinging to a gain of 4.1% for the year so far.
In other trading Wednesday, benchmark U.S. crude lost 35 cents to $76.01 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, fell 37 cents to $82.68 a barrel.
The U.S. dollar fell to 134.85 Japanese yen from 134.92 yen. The euro rose to $1.0659 from $1.0653.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
TOKYO — Asian shares declined Wednesday after stocks tumbled on Wall Street as worries persist about higher interest rates and their tightening squeeze on the global economy.
Tokyo’s benchmark Nikkei 225 dipped 1.4% in afternoon trading to 27,102.21. Australia’s S&P/ASX 200 slipped 0.3% to 7,314.50. South Korea’s Kospi dropped 1.6% to 2,419.15. Hong Kong’s Hang Seng slipped 0.3% to 20,461.32, while the Shanghai Composite shed 0.6% to 3,287.64.
New Zealand’s central bank raised its benchmark interest rate by a half-point to 4.75% to try to wrestle down inflation. The increase, which can raise the borrowing costs for consumers on everything from credit cards to mortgages, comes despite widespread economic pain from a devastating cyclone.
Higher rates hurt investment prices and raise the risk of a recession by slowing business investment and consumer spending.
U.S. employment and consumer spending have weathered higher interest rates well, but a report Tuesday showed sales of previously occupied homes slowed to their slowest pace in more than a decade. The mixed signals leave investors wondering if the Fed will ease back on rate hikes or resume a more aggressive stance.
“Amid the evolving new narrative of stronger US growth, payrolls, retail sales, and the additional Fed response required to tame the rude health of the US economy, investors are beginning to think the hawkish Fed may not have entirely run its course yet,” Stephen Innes of SPI Asset Management said in a commentary.
The S&P 500 fell 2% to 3,997.34 on Tuesday for its sharpest drop since the market was selling off in December. The Dow Jones Industrial Average lost 697 points, or 2.1%, to 33,129.59 while the Nasdaq composite sank 2.5% to 11,492.30.
Home Depot fell to one of the market’s larger losses after giving financial forecasts that fell short of Wall Street’s expectations. It dropped 7.1% despite reporting stronger profit for the last three months of 2022 than expected.
The retailer said it would spend $1 billion to increase wages for hourly U.S. and Canadian workers. That fed into broader worries for markets that rising costs for companies have been eating into profits, which are one of the main levers that set stock prices.
Rates and stock prices are high enough that strategists at Morgan Stanley say U.S. stocks look to be more expensive than at any time since 2007.
The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, leaped further to 3.95% from 3.82% late Friday. The two-year yield, which moves more on expectations for the Fed, rose to 4.72% from 4.62%. It’s close to its highest level since 2007.
Yields have shot higher this month as Wall Street ups its forecasts for how high the Federal Reserve will take short-term interest rates in its efforts to stamp out inflation. The Fed has already pulled its key overnight rate up to a range of 4.50% to 4.75%, up from basically zero at the start of last year.
The worry is that the Fed could ratchet up its forecasts for rates further next month when it releases its latest projections for the economy. Besides showing more strength in the job market and retail sales than expected, recent reports have also suggested inflation is not cooling as quickly and as smoothly as hoped. Investors are also pushing back their forecasts for when the first cut to rates could happen.
Those worries have caused the strong rally by Wall Street early in the year to stall. Having risen as much as 8.9%, the S&P 500 is now clinging to a gain of 4.1% for the year so far.
In other trading Wednesday, benchmark U.S. crude lost 35 cents to $76.01 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, fell 37 cents to $82.68 a barrel.
The U.S. dollar fell to 134.85 Japanese yen from 134.92 yen. The euro rose to $1.0659 from $1.0653.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
January marked the 12th straight monthly decline in sales of existing homes, the longest such stretch since 1999.
United States existing home sales dropped to a more than 12-year low in January, but the pace of decline slowed, raising cautious optimism that the housing market slump could be close to reaching a bottom.
Existing home sales fell 0.7 percent to a seasonally adjusted annual rate of four million units last month, the lowest level since October 2010, the National Association of Realtors said on Tuesday. That marked the 12th straight monthly decline in sales, the longest such stretch since 1999.
Sales fell in the Northeast and Midwest, but rose in the South and West. Economists polled by Reuters had forecast home sales rising to a rate of 4.10 million units.
Home resales, which account for a big chunk of US housing sales, plunged 36.9 percent on a year-on-year basis in January.
“Home sales are bottoming out,” said NAR chief economist Lawrence Yun.
But the worst is probably over. Homebuilders’ sentiment rose to a five-month high in February, though still depressed. It will, however, be a while before the housing market turns around. Government data last week showed single-family homebuilding and permits for future home construction declining in January.
Mortgage rates are rising again, with the 30-year fixed mortgage rate increasing to an average 6.32 percent last week from 6.12 percent the prior week, according to data from mortgage finance agency Freddie Mac. The second straight weekly increase reflected a spike in bond yields after recent strong data on retail sales and inflation raised fears that the Fed could continue raising interest rates after the middle of the year.
The median existing house price increased 1.3 percent from a year earlier to $359,000 in January. There were 980,000 previously owned homes on the market, up 2.1 percent from December and 15.3 percent from a year ago.
At January’s sales pace, it would take 2.9 months to exhaust the current inventory of existing homes, up from 1.6 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Properties typically remained on the market for 33 days last month, up from 26 days in December. Fifty-four percent of homes sold in January were on the market for less than a month.
First-time buyers accounted for 31 percent of sales, up from 27 percent a year ago. All-cash sales made up 29 percent of transactions compared to 27 percent a year ago.
NEW YORK (AP) — Stocks are slumping on Wall Street Tuesday amid worries about upcoming profits for companies and the tightening squeeze of higher interest rates.
The S&P 500 was 1.3% lower in its first trading of the week following Monday’s holiday. The Dow Jones Industrial Average was down 489 points, or 1.4%, at 33,337, as of 10:15 a.m. Eastern time, while the Nasdaq composite was 1.7% lower.
Home Depot fell to one of the S&P 500′s larger losses despite reporting stronger profit for the last three months of 2022 than expected. It dropped 5.6% on worries about upcoming earnings after it gave forecasts that fell short of Wall Street’s expectations.
The retailer said it would spend $1 billion to increase wages for hourly U.S. and Canadian workers. That fed into broader worries for markets that rising costs for companies have been eating into profits, which are one of the main levers that set stock prices.
The other main lever is also looking precarious as interest rates continue to rise. When safe bonds are paying higher amounts of interest, they make stocks and other investment look comparatively more expensive. Rates have climbed high enough that strategists at Morgan Stanley say U.S. stocks look to be more expensive than at any time since 2007.
The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose further to 3.93% from 3.82% late Friday. The two-year yield, which moves more on expectations for the Fed, leaped to 4.71% from 4.62%.
Yields have shot higher this month as Wall Street ups its forecasts for how high the Federal Reserve will take short-term interest rates in its efforts to drive down high inflation. The Fed has already pulled its key overnight rate up to a range of 4.50% to 4.75%, up from basically zero a year ago.
Several reports have recently come in on the economy that were stronger than expected. On the positive side for markets, they helped allay fears that the economy may soon fall into a recession. But on the negative side, they also give the Fed more reason to stick to the “higher for longer” campaign it’s been espousing for interest rates to snuff out inflation.
A resilient economy could keep the pressure up on inflation.
The latest evidence came from a preliminary report Tuesday that suggested business activity is gaining momentum. The services industry likely returned to growth last month and was at an eight-month high, according to S&P Global. Manufacturing, meanwhile, may still be contracting, but the reading hit a four-month high.
Besides dragging on prices for investments, higher rates also slow the economy by making borrowing more expensive and raise the risk of a recession down the line. That’s caused the more pessimistic investors on Wall Street to keep their forecasts for a recession but move its timing later into the year.
The Fed said in December that its typical policy maker sees short-term rates rising to 5.1% by the end of this year with the earliest cut to rates happening in 2024. After earlier thinking the Fed would ultimately take it easier on rates than it was saying, Wall Street has largely come into closer alignment with the Fed’s view.
The worry is that the Fed could ratchet up its forecasts for rates further next month when it releases its latest projections for the economy. Besides showing the job market and retail sales have been stronger than expected, recent reports on the economy have also suggested inflation is not cooling as quickly and as smoothly as hoped.
Those worries have caused a stall for the strong rally by Wall Street to start the year. After earlier jumping as much as 8.9%, the S&P 500 is now clinging to a gain of 4.9% for the year so far.
In stock markets abroad, shares were mostly lower after manufacturing indicators in Europe and Asia painted a mixed picture and Russian President Vladimir Putin accused Western countries of threatening Russia.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
Futures on Wall Street dipped Tuesday, extending last week’s selling that dragged the benchmark S&P to its first back-to-back weekly declines since the turn of the year.
Futures for the Dow Jones Industrial Average S&P 500 each slid 0.8% before the bell opened a holiday-shortened trading week.
Global shares were mostly lower after manufacturing indicators in Europe and Asia painted a mixed picture and Russian President Vladimir Putin accused Western countries of threatening Russia.
Russian President Vladimir Putin railed against the West Tuesday in a long-delayed state-of-the-nation address that shed light on how the Kremlin sees its bogged-down war in Ukraine. Such geopolitical factors add to uncertainties over slowing growth and weakening consumer demand in many economies.
Home Depot shares slid almost 4% in premarket Tuesday after the home improvement retailer gave a tepid outlook for this year despite posting strong profits to close out 2022. Walmart also posted annual earnings and its shares slipped for the same reason.
Markets turned turbulent in February after a strong start to the year, after optimism faded that the Federal Reserve would ease back on its aggressive monetary policies as it tries to tamp down inflation. Recent economic reports have raised worries that inflation is not cooling as quickly and as smoothly as hoped.
In Europe, surveys of factory managers showed improvement in the manufacturing outlook in Britain but contractions in France and Germany.
France’s CAC 40 and Germany’s DAX each lost 0.4% in midday trading in Europe. Britain’s FTSE 100 edged down 0.2%.
In Japan, a preliminary manufacturing indicator, the flash purchasing manager’s index, or PMI, fell to 47.4 in February from 48.9 the month before. That was the weakest reading in more than two years.
Tokyo’s Nikkei 225 shed 0.2% to 27,473.10. Australia’s S&P/ASX 200 slipped 0.2% to 7,336.30. South Korea’s Kospi gained nearly 0.2% to 2,458.96. Hong Kong’s Hang Seng dipped 1.8% to 20,517.91, while the Shanghai Composite gained 0.5% to 3,306.52.
It was unclear if newly issued rules on overseas initial public offerings by Chinese companies had any significant impact on trading.
China cleared the way for more companies to join foreign stock exchanges but issued rules that might make the stock offering process more time-consuming by requiring stricter regulatory scrutiny in advance.
This week will bring updates on U.S. manufacturing and housing and minutes from the last meeting of the Federal Reserve that might provide insights into the outlook for inflation and interest rates.
In energy trading, benchmark U.S. crude picked up 72 cents to $77.06 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, lost 50 cents to $83.57 a barrel.
In currency trading, the U.S. dollar inched up to 134.76 Japanese yen from 134.26 yen. The euro cost $1.0655, down from $1.0689.
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Kageyama reported from Tokyo; Ott reported from Silver Spring, Md.
BANGKOK — Shares were mostly higher in Asia on Monday after Wall Street closed out another bumpy week with a mixed performance.
U.S. futures edged lower, while oil prices advanced. U.S. markets will be closed for a holiday Monday.
China left its benchmark lending rate, the loan prime rate, unchanged as expected. The 1-year rate was kept at 3.65% while the 5-year rate is 4.3%.
Hong Kong’s Hang Seng index gained 0.8% to 20,887.16 while the Shanghai Composite index jumped 1% to 3,255.80. Tokyo’s Nikkei 225 was unchanged at 27,513.45.
South Korea’s Kospi added 0.3% to 2,458.67 and Australia’s S&P/ASX 200 edged 0.1% higher to 7,355.00. Shares in Southeast Asian markets declined, apart from in Bangkok, where the SET gained 0.4% in morning trading.
Recent data have revived worries that inflation in the United States is not cooling as quickly as hoped. That has shaken hopes the Federal Reserve might take it easier on interest rate hikes and avoid tipping the economy into recession.
That has added to turbulence on Wall Street after the year started off with solid gains.
“There was not a lot of major news, but in the back of every traders’ mind was the thought that this whole ‘high inflation/Fed hiking’ scenario, may not actually be over as soon as many hoped,” Clifford Bennett, chief economist at ACY Securities, said in a commentary. “The troubles may be far from over.”
The S&P fell 0.3% to 4,079.09 after paring a bigger loss from the morning. The Dow Jones Industrial Average rose 0.4% to 33,826.69 after coming back from an early loss. The Nasdaq composite fell 0.6% to 11,787.27.
Reports recently have shown more strength than expected in everything from the job market to retail sales to inflation itself, raising worries that the Federal Reserve will have to get tougher on interest rates. That extra resilience has reassured investors that the economy may avoid a worst-case recession.
Jobs are still plentiful, and shoppers are still spending to prop up the most important part of the economy, consumer spending. That’s helped the S&P 500 index hold onto a gain of 6.2% since the start of the year.
The fear is that if inflation proves stickier than expected, it could push the Fed to get even more aggressive than it’s prepared the market for. Such movements have been most clear in the bond market, where yields have soared this month on expectations for a firmer Fed.
This week, an update Thursday on U.S. economic growth in October-December will provide more insight into how businesses and consumers are faring. The forecasts are that growth will have slowed to 2.8% or 2.9% from the previous quarter, down from 3.2%.
In other trading Monday, U.S. benchmark crude oil gained 37 cents to $76.92 per barrel in electronic trading on the New York Mercantile Exchange. It sank $2.19 on Friday to $76.55 per barrel.
Brent crude oil, the pricing basis for international trading, picked up 40 cents to $83.40 per barrel.
The U.S. dollar slipped to 134.13 Japanese yen from 134.28 yen. The euro fell to $1.0684 from $1.0681.
Stocks ended mixed on Wall Street after paring losses from the morning.
The S&P 500 still posted its first back-to-back weekly declines since the turn of the year. The index lost 0.3% Friday. The Dow Jones Industrial Average rose, while the Nasdaq composite fell.
Stocks have hit turbulence in February after shooting higher in January on hopes that cooling inflation could get the Federal Reserve to take it easier on interest rates and that the economy could avoid a severe recession. Recent economic reports have raised worries that inflation is not cooling as quickly and as smoothly as hoped.
On Friday:
The S&P 500 fell 11.32 points, or 0.3%, to 4,079.09.
The Dow Jones Industrial Average rose 129.84 points, or 0.4%, to 33,826.69.
The Nasdaq composite fell 68.56 points, or 0.6%, to 11,787.27.
The Russell 2000 index of smaller companies rose 4.14 points, or 0.2%, to 1,946.36.
NEW YORK — Stocks are falling again on Wall Street Friday, and the S&P 500 is on track for its first back-to-back weekly drop since the turn of the year.
Wall Street’s benchmark index was 0.8% lower in early trading, a day after sliding to its worst loss in four weeks on worries inflation isn’t slowing as quickly and as smoothly as hoped. The Dow Jones Industrial Average was down 152 points, or 0.5%, at 33,544, as of 9:45 a.m. Eastern time, and the Nasdaq composite was 1.1% lower.
Stocks have hit turbulence in February after shooting higher in January on hopes that cooling inflation could get the Federal Reserve to take it easier on interest rates and that the economy could avoid a severe recession. Reports recently, though, have shown more strength than expected in everything from the job market to retail sales to inflation itself.
That’s forced a drastic recalibration on Wall Street as investors move their forecasts for interest rates closer to the “higher for longer” stance that the Federal Reserve has long been espousing. High rates can drive down inflation, but they also hurt investment prices and risk causing a severe recession.
Economists at Goldman Sachs added one more hike by the Fed in June to their forecast, meaning they see its key short-term rate ultimately rising to a range of 5.25% to 5.50%. That rate was at virtually zero a year ago, and it hasn’t topped 5.25% since the dot-com bubble was deflating in 2001.
The fear is that if inflation proves even stickier than expected, it could push the Fed to get even more aggressive than it’s prepared the market for. Such movements have been most clear in the bond market, where yields have soared this month on expectations for a firmer Fed.
The two-year Treasury yield rose to 4.68% from 4.62% late Thursday and from less than 4.10% earlier this month. It’s approaching its heights from November, when it reached its highest point since 2007.
The 10-year yield, which helps set rates for mortgages and other important loans, rose to 3.88% from 3.84% late Thursday.
Still offering some support to the stock market despite those worries are remaining hopes that the economy can avoid a worst-case recession. Jobs are still plentiful, and shoppers are still spending to prop up the most important part of the economy, consumer spending.
But critics say many of those areas also tend to be among the last to feel the effects of higher interest rates and may still topple. And the strength in the economy has been continuing even after the Fed has already raised rates at the most aggressive pace in decades.
“Fed tightening always ‘breaks’ something,” investment strategist Michael Hartnett wrote in a BofA Global Research report. He said the S&P 500 could fall to 3,800 by March 8, which would mark a drop of a little more than 7% from its closing level on Thursday.
In stock markets abroad, Hong Kong’s Hang Seng lost 1.3%. Losses were amplified by news that a major tech industry dealmaker, Bao Fan, apparently has gone missing.
Shares in one of China’s top investment banks, China Renaissance, plunged Friday after the company said in a filing to Hong Kong’s stock exchange that it had lost touch with Bao, its founder. Bao’s disappearance follows a crackdown on technology companies in the past two years that officials in China said had been wrapped up.
Stocks also mostly fell across Asian and European markets.
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AP Business Writers Elaine Kurtenbach and Matt Ott contributed.
NEW YORK (AP) — Wall Street closed another bumpy week with a mixed performance on Friday amid worries that inflation is not cooling as quickly or as smoothly as hoped.
The S&P fell 0.3% after paring a bigger loss from the morning. The Dow Jones Industrial Average rose 129 points, or 0.4%, after coming back from an early loss of 179 points, while the Nasdaq composite fell 0.6%.
Stocks have hit turbulence in February after shooting higher in January with hopes that cooling inflation could get the Federal Reserve to take it easier on interest rates and that the economy could avoid a severe recession. Reports recently have shown more strength than expected in everything from the job market to retail sales to inflation itself, raising worries that the Federal Reserve will have to get tougher on interest rates.
That’s forced a sharp recalibration on Wall Street as investors move their forecasts for rates closer to the “higher for longer” stance that the Federal Reserve has long been espousing. The hope is that high rates can drive down inflation, but they also hurt investment prices and risk causing a severe recession.
Economists at Goldman Sachs added one more hike by the Fed in June to their forecast, meaning they see its key short-term rate ultimately rising to a range of 5.25% to 5.50%. That rate was at virtually zero a year ago, and it hasn’t topped 5.25% since the dot-com bubble was deflating in 2001. It’s currently at a range of 4.50% to 4.75%.
The fear is that if inflation proves stickier than expected, it could push the Fed to get even more aggressive than it’s prepared the market for. Such movements have been most clear in the bond market, where yields have soared this month on expectations for a firmer Fed.
The two-year Treasury yield topped 4.70% in the morning, up from 4.62% late Thursday and from less than 4.10% earlier this month. It later pulled back to 4.61%. It has recently approached its heights from November, when it reached its highest point since 2007.
Still offering some support to the stock market are remaining hopes among investors that the economy can avoid a worst-case recession. Jobs are still plentiful, and shoppers are still spending to prop up the most important part of the economy, consumer spending. That’s helped the S&P 500 index hold onto a gain of 6.2% since the start of the year.
But critics say many of those areas also tend to be among the last to feel the effects of higher interest rates and may still crack. And the Fed has already raised rates by the most aggressive pace in decades.
“Fed tightening always ‘breaks’ something,” investment strategist Michael Hartnett wrote in a BofA Global Research report.
Complicating things are all the revisions and changes in methodology embedded in recent data reports on the economy, which may be clouding the signal they give, said Michael Green, chief strategist at Simplify Asset Management.
He’s also worried about how much of the high inflation sweeping the economy is the result of reduced competition as companies across industries consolidated, something that rate hikes by themselves can’t solve.
“We’ve created a feedback loop where the Fed will hike interest rates until they break something,” Green said. “Then the question is: How do they respond?”
Big technology and other high-growth companies have been taking the brunt of worries about the Fed because they’re seen as some of the most vulnerable to higher rates. Their stocks soared in earlier years in part because of record-low rates.
Microsoft fell 1.6% and Nvidia lost 2.8% for some of the heaviest weights on the S&P 500.
Energy stocks also tumbled as the price of oil weakened. Exxon Mobil fell 3.8%.
On the winning side was Deere, which gained 7.5% after reporting stronger profit for its latest quarter than analysts expected.
Altogether, the S&P 500 fell 11.32 points to 4,079.09. The Dow rose 129.84 to 33,826.69, and the Nasdaq fell 68.56 to 11,787.27.
In stock markets abroad, Hong Kong’s Hang Seng lost 1.3%. Losses were amplified by news that a major tech industry dealmaker, Bao Fan, apparently has gone missing.
Shares in one of China’s top investment banks, China Renaissance, plunged Friday after the company said in a filing to Hong Kong’s stock exchange that it had lost touch with Bao, its founder. Bao’s disappearance follows a crackdown on technology companies in the past two years that officials in China said had been wrapped up.
Stocks also mostly fell across Asian and European markets.
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AP Business Writers Elaine Kurtenbach and Matt Ott contributed.
BANGKOK — Shares slipped in Europe and Asia on Friday after benchmarks on Wall Street had their biggest drop in four weeks as investors registered disappointment over an inflation reading that came in hotter than expected.
Oil prices and U.S. futures also declined after the S&P 500 fell 1.4% Thursday following news that inflation at the wholesale level slowed by less than economists had forecast. It echoed a report on prices at the consumer level from earlier this week that suggested inflation isn’t cooling as quickly and as smoothly as hoped.
Stocks have swung between gains and losses recently on worries that persistently high inflation will push the Federal Reserve to get even more aggressive on interest rates. Higher rates can drive down inflation but also drag on investment prices and raise the risk of a serious recession.
“Continued strength in the inflation data suggests the Fed’s work is still not finished, and risks of a longer cycle are rising,” Stephen Innes of SPI Asset Management said in a report.
Germany’s DAX sank 0.9% to 15,386.39 and the CAC 40 in Paris gave up 0.8% to 7,311.13. Britain’s FTSE 100 slipped 0.5% to 7,968.31.
The future for the Dow Jones Industrial Average was down 0.5% while that for the S&P 500 shed 0.3%.
In Asian trading, Tokyo’s Nikkei 225 fell 0.7% to 27,513.13 and the Kospi in South Korea sank 1% to 2,450.20.
Hong Kong’s Hang Seng lost 1.3% to 20,836.08. Losses were amplified by news that a major tech industry dealmaker, Bao Fan, apparently has gone missing.
Shares in one of China’s top investment banks, China Renaissance, plunged Friday after the company said in a filing to Hong Kong’s stock exchange that it had lost touch with Bao, its founder. Bao’s disappearance follows a crackdown on technology companies in the past two years that officials in China said had been wrapped up.
The Shanghai Composite index gave up 0.8% to 3,224.02 and Australia’s S&P/ASX 200 shed 0.9% to 7,346.80. Taiwan’s benchmark lost 0.5%.
Bangkok’s SET index fell 0.7% after the government reported the economy grew at a meager 2.6% annual pace in 2022 and slowed more than expected in the last quarter of the year, to a 1.3% annual expansion, as a rebound in tourism failed to make up for weaker exports. On a quarterly basis GDP fell 1.5% in October-December.
On Thursday, the Dow Jones Industrial Average lost 1.3%, while the Nasdaq composite dropped 1.8%.
Thursday’s inflation report showed that prices at the wholesale level were 6% higher last month than a year earlier, slower than December’s rate but worse than expected. Perhaps more concerning was that inflation accelerated in January on a month-to-month basis even after stripping out prices for food, energy and other layers.
The inflation report thudded onto Wall Street along with a batch of other data painting a mixed picture of the economy.
Fewer workers applied for jobless benefits last week than expected, suggesting that layoffs remain low across the economy. That’s good news for workers and another signal of strength for the job market, but the Fed worries it could also add upward pressure on inflation.
Loretta Mester, president of the Federal Reserve Bank of Cleveland, said in a speech Thursday that she saw “a compelling economic case” at the Fed’s meeting earlier this month to raise rates by double what it did.
In other trading Friday, U.S. benchmark crude oil lost $1.48 to $77.00 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing basis, gave up $1.54 to $83.60 per barrel.
The dollar rose to 134.94 Japanese yen from 133.99 yen. The euro slipped to $1.0639 from $1.0673.
NEW YORK — Stocks are sinking on Wall Street Thursday on worries that inflation is remaining hotter than feared.
The S&P 500 was 1.1% lower in early trading after a report showed inflation at the wholesale level slowed by less last month than economists forecast. It echoed a report on prices at the consumer level from earlier this week that showed inflation may not be cooling as quickly and as smoothly as hoped.
The Dow Jones Industrial Average was down 287 points, or 0.8%, at 33,840, as of 9:40 a.m. Eastern time, while the Nasdaq composite was 1.2% lower.
Stocks have been churning recently as worries about sticky inflation joust against data showing the economy remains more resilient than feared. The worry has been that persistently high inflation will push the Federal Reserve to get even more aggressive on interest rates. Higher rates can drive down inflation but also drag on investment prices and raise the risk of a serious recession.
Such fears have been most clear in the bond market, where yields have leaped in recent weeks as traders up their bets for how high the Fed will take interest rates this year.
The yield on the two-year Treasury, which tends to track expectations for Fed action, jumped to 4.64% from less than 4.60% before the inflation report’s release and from less than 4.10% earlier this month. It’s near its highest level since November, when the yield reached levels last seen in 2007 before the Great Recession.
The 10-year Treasury yield, which helps set rates for mortgages and other loans, rose to 3.84% from 3.80% late Wednesday.
Thursday’s report showed that prices at the wholesale level were 6% higher last month than a year earlier. While that was a slowdown from December’s 6.5% inflation rate, it was worse than the 5.4% that economists expected to see. Perhaps more alarming was that inflation accelerated in January on a month-to-month basis even after stripping out prices for food, energy and other layers.
The inflation report thudded onto Wall Street along with a batch of other data painting a mixed picture of the economy.
Fewer workers applied for jobless benefits last week than expected, a sign that layoffs remain low across the economy. That’s good news for workers and another sign of strength for the job market, but the Fed worries it could also add upward pressure on inflation.
Other reports, meanwhile, showed an index of manufacturing activity in the mid-Atlantic region plunged this month, while homebuilders broke ground on fewer homes last month than economists expected.
Altogether, the reports raised doubt about the budding hopes on Wall Street that the Federal Reserve could pull off the tightrope walk of slowing the economy just enough to stamp out inflation but not so much that it creates a severe recession.
The Fed has already hiked its key overnight rate up to a range of 4.50% to 4.75%, up from basically zero a year ago. It has said that it expects to push through a couple more increases before holding rates at a high level at least through the end of this year.
The strong recent reports on inflation and the job market have forced Wall Street to align its forecasts for rates closer to the Fed’s. Earlier this year, there was a wide disconnect between them. Investors were betting the Fed wouldn’t go as high as it was saying, while also holding out significant hopes for a cut to rates in the latter part of the year.
The fear now is that if inflation proves sticker than expected that the Fed will have to go beyond what it’s been prepping the market for.
Some stocks on Wall Street were able to buck the overall downward trend after reporting stronger earnings for the latest quarter than expected. Networking giant Cisco Systems rose 5.8%, and waste services company Republic Services gained 2.6%.
Big tech stocks were helping to lead the overall market lower, though, because they’re seen as some of the most vulnerable to higher interest rates. In earlier years, their stocks shot higher in part because of record-low interest rates.
A 2.1% fall for Microsoft, 2.7% drop for Nvidia and 2.3% slide for Amazon were some of the heaviest weights on the S&P 500.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
TOKYO — Global shares were mostly higher Thursday, cheered on by a stronger than expected reading on U.S. retail sales that set off a rally on Wall Street.
France’s CAC 40 edged up 0.8% in early trading to 7,356.36. Germany’s DAX added 0.5% to 15,586.02. Britain’s FTSE 100 gained 0.3% to 8,021.43. U.S. shares were set to drift higher with Dow futures little changed but slightly higher at 34,179.00. S&P 500 futures rose nearly 0.2% to 4,166.25.
In the latest data on the regional economy, Japan’s trade deficit reached a record 3.497 trillion yen ($26.2 billion) in January. Imports for the world’s third-largest economy jumped amid higher raw material and energy costs, and a weak yen. Exports rose 3.5%.
Japan’s benchmark Nikkei 225 gained 0.7% to finish at 27,696.44. Australia’s S&P/ASX 200 rose 0.8% to 7,410.30. South Korea’s Kospi jumped 2.0% to 2,475.48. Hong Kong’s Hang Seng added 0.8% to 20,987.67, while the Shanghai Composite slipped 1.0% to 3,249.03.
“Asian equities were higher on Thursday after a positive day on Wall Street, where price action was driven by strong retail sales in the US, which signaled a hot economy at the start of the year,” Anderson Alves at ActivTrades said in a report.
Japanese machinery orders for December returned to growth after contracting in the previous month.
The total value of machinery orders received by 280 manufacturers in Japan, a key indicator for private sector investment, rose a seasonally adjusted 6.5% in December from the month before. The key indicator, private-sector machinery orders, excluding volatile ones for ships and electric power companies, increased 1.6% in December.
Sales at U.S. retailers jumped by more last month than expected, even as shoppers contended with higher interest rates on credit cards and other loans. The surprising strength offers hope that the most important part of the U.S. economy, consumer spending, will remain resilient despite worries about a possible recession. It’s the latest piece of data to show the economy remains stronger than feared.
At the same time, though, the strong demand could add more fuel to inflation, leading the Federal Reserve to keep interest rates high. A report earlier this week showed prices are cooling less than expected.
After Tuesday’s data on inflation was slightly hotter than expected, economists at Deutsche Bank raised their forecast for how high the Fed will take its key overnight interest rate. They now see it ultimately rising to 5.6%, up from their prior forecast of 5.1%.
The Fed has already pulled its overnight rate all the way to a range of 4.50% to 4.75%, up from virtually zero a year ago.
The Deutsche Bank economists said they still expect a recession, but that the near-term strength in the economy could push its timing into the last three months of the year, later than they earlier thought.
Many other traders have also been raising their forecasts for how high the Fed will ultimately take interest rates. They’ve also sharply reduced bets for the Fed to cut rates late this year. The next big milestone for the market will likely be the Fed’s meeting in late March, when policymakers will give their latest forecasts for where interest rates will be at the end of the year.
In energy trading, benchmark U.S. crude added 57 cents to $79.16 a barrel in electronic trading on the New York Mercantile Exchange. It fell 47 cents to $78.59 on Wednesday. Brent crude, the international pricing standard, rose 48 cents to $85.86 a barrel.
In currency trading, the U.S. dollar fell to 133.90 Japanese yen from 134.16 yen. The euro cost $1.0712, up from $1.0690.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
NEW YORK — Stocks are slipping on Wall Street Wednesday after a report showed U.S. shoppers opened their wallets at retail stores last month by much more than expected.
The S&P 500 was 0.6% lower in morning trading. The Dow Jones Industrial Average was down 198 points, or 0.6%, at 33,890, as of 10:07 a.m. Eastern time, and the Nasdaq composite was 0.6% lower.
Sales at U.S. retailers jumped more than expected last month, even as shoppers contend with higher interest rates on credit cards and other loans. The surprising strength offers hope that the most important part of the U.S. economy, consumer spending, can stay afloat despite worries about a possible recession looming. It’s the latest piece of data to show the economy remains more resilient than feared.
At the same time, though, the strong buying potentially adds more fuel to inflation, which a report earlier this week showed is cooling by less than expected. Upward pressure on inflation could force the Federal Reserve to stay more aggressive in keeping interest rates high.
High rates can drive down inflation, but they also drag on investment prices and raise the risk of a painful recession.
The worries about higher rates and a firmer Fed have been most evident in the bond market, where yields on Treasurys have jumped since a report two Fridays ago showed the U.S. job market remains stronger than expected.
The yield on the two-year Treasury, which tends to track expectations for the Fed, briefly jumped toward 4.70% after the retail sales report, up from less than 4.60% overnight and from 4.62% late Tuesday. It then dropped back to 4.60%, which is still near its highest level since November.
The 10-year yield, which helps set rates for mortgages and other important loans, held steady at 3.75%.
Following Tuesday’s data on inflation that was slightly hotter than expected, economists at Deutsche Bank raised their forecast for how high the Fed will take its key overnight interest rate. They now see it ultimately rising to 5.6%, up from their prior forecast of 5.1%.
The Fed has already pulled its overnight rate all the way to a range of 4.50% to 4.75%, up from virtually zero a year ago.
The Deutsche Bank economists said they still expect a recession, but that the near-term strength in the economy could push its timing into the last three months of the year, later than they earlier thought.
Many other traders have also been raising their forecasts for how high the Fed will ultimately take interest rates. They’ve also sharply reduced bets for the Fed to cut rates late this year.
Even still, stocks are hanging onto healthy gains for the year despite some recent rockiness. The S&P 500 is up 7% as strong data reports build hope that the economy may be able to avoid a recession. Or, if one hits, perhaps it may be only a short and shallow one.
On Wall Street, shares of Airbnb jumped 12.6% after reporting stronger profit and revenue for its latest quarter than analysts expected. It also said trends remain encouraging into the new year, and it gave a forecast for revenue that topped Wall Street’s.
On the losing end were stocks of energy producers, which dropped with the price of oil. A barrel of U.S. crude slipped 0.8% to $78.39, while Brent crude, which is the international standard, fell 1.3% to $84.50. Energy stocks in the S&P 500 fell 2.2%, by far the worst performance of the 11 sectors that make up the index.
One of the sharpest drops in the S&P 500 came from Devon Energy, which fell 11.8% after reporting weaker profit for the latest quarter than expected.
This earnings reporting season has been muted, with many companies reporting pressure on their profits from high costs and interest rates.
In stock markets abroad, Turkey’s market jumped nearly 10% after trading reopened following a closure caused by the devastating earthquake in the region.
European stocks were modestly higher, with Germany’s DAX returning 0.7%. Asian stocks were weaker, with Hong Kong’s Hang Seng down 1.4% and South Korea’s Kospi down 1.5%.
NEW YORK — Wall Street is drifting on Friday as stocks head toward the close of their worst week since December.
The S&P 500 was virtually unchanged in afternoon trading after flipping between small gains and losses. It’s on pace for a 1.4% loss for the week. The Dow Jones Industrial Average was up 102 points, or 0.3%, at 33,805, as of 1:10 p.m. Eastern time, while the Nasdaq composite was 0.9% lower.
Stocks have been struggling since rallying at the start of the year on hopes that the economy could avoid a severe recession and that cooling inflation could get the Federal Reserve to take it easier on interest rates. Since late last week, worries have risen that a still-strong jobs market could up the pressure on inflation and keep the Fed on track to leave rates at the higher-for-longer level that it’s been talking about.
Higher rates can drive down inflation but they also raise the risk of a recession and drag down investment prices. And central banks around the world are intent on tightening the screws further by raising rates, even if at a slower pace than before.
“For most central banks the risk is that they have tightened too little, not too much,” economists led by Ethan Harris wrote in a BofA Global Research report.
“The ultimate gauge of success here is not avoiding a recession, but getting inflation on a path back to target,” Harris wrote.
Investors will get more updates on inflation next week when the government reports January data for prices at both the consumer and wholesale levels.
The worries about rates mean much of Wall Street’s action has been in the bond market, where yields have climbed on expectations for a firmer Fed. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.72% from 3.66% late Thursday. The two-year yield, which moves more on expectations for the Fed, ticked up to 4.50% from 4.48%. It was at 4.08% just over a week ago and is near its highest level since November.
One area the Fed has focused on keeping under control is expectations for inflation among U.S. households. If those took off, the fear is that a self-reinforcing cycle could take hold that only worsens inflation.
A preliminary report Friday showed expectations for year-ahead inflation rose to 4.2% from from 3.9% in January, according to the University of Michigan. But that’s still down from 4.4% in December. The report also showed mixed sentiment about the economy, though the overall reading was a bit better than expected.
Companies in recent weeks have also been delivering a mixed set of earnings reports for the end of 2022.
Lyft tumbled 36.3% following its latest report. The ride-hailing company gave a forecast for revenue in the first three months of 2023 that fell short of analysts’ expectations.
Newell Brands, whose brands include Sharpie markers and Calphalon cookware, fell 1.5% despite reporting stronger revenue and profit for the latest quarter than analysts expected. Forecasts for revenue and earnings this upcoming year were below analysts’ forecasts.
Given worries about still-high inflation and a slowing economy eating into corporate profits, analysts have been cutting their forecasts for upcoming earnings for companies. So far this year, analysts have cut their expectations for S&P 500 companies’ first-quarter earnings by 4.5%, according to strategists at Credit Suisse. That’s a deeper cut than average.
News Corp. fell 7.5% after the owner of The Wall Street Journal and other media reported weaker quarterly results than expected. It also said it will cut 5% of its workforce in 2023 as it contends with higher interest rates and inflation. Layoff announcements have been spreading across more industries after earlier focusing mostly on the tech sector.
Expedia lost 8.3% after reporting weaker profit and revenue for the latest quarter than expected.
On the winning side of Wall Street were energy stocks, which rose with the price of crude oil. Marathon Oil climbed 5.1%, and Valero Energy gained 5.6%.
Oil prices rose after Russia announced Friday that it will cut oil production by 500,000 barrels per day next month. Western countries had capped the price of Russia’s crude over its invasion of Ukraine. Brent crude, the international standard, rose 1.6% to $86.01 per barrel.
Benchmark U.S. crude added 1.7% to $79.37 per barrel.
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AP Business Writers Damian J. Troise, Yuri Kageyama and Matt Ott contributed.
Mumbai, India – Amid the usual traffic snarls on one of central Mumbai’s busiest overpasses, drivers could hardly help but notice a simple, yet large, hand-painted slogan proclaiming that the rapidly rising wealth of businessmen Gautam Adani and Mukesh Ambani was a miracle of Narendra Modi’s government.
In the city’s stock market, however, Adani’s wealth, which has increased by more than $100bn in less than a decade, was eroding faster than the paint on the slogan could dry. Adani’s self-named conglomerate grew by running a rapidly increasing share of India’s public infrastructure including ports, airports, power plants and coal mines.
However, a recent report by the New York-based activist short-seller Hindenburg Research showed a vast array of offshore entities with ties to the Adani group, which it indicated may have been used to inflate profits, hide losses or blur ownership. The report, titled Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History, said the group was involved in “brazen stock manipulation and accounting fraud”.
The report, which came out on January 24, hit India and stocks of the group’s listed companies like a bombshell, even as they retraced several older trails of regulators’ inquiries that had gone nowhere. The ensuing days wiped more than $110bn of market value off the group’s listed firms and halved Adani’s net worth.
Hindenburg’s report came just as the 200 billion rupees ($2.5bn) follow-on public offer of Adani group’s flagship Adani Enterprises was to open on the Bombay Stock Exchange. The group hit back at the report on the day of the public offer opening, January 27, saying it was an “attack on India”. It put out a 432-page response and scrambled to get the public offering subscribed.
But stock prices for group companies continued to fall and Adani Enterprises said it would scrap the offering, even though it had been fully subscribed and the money returned to investors.
The damage from the report has extended far beyond the Adani group. Its allegations of regulatory failings and questionable corporate governance have been ill-timed for India as it seeks the global centre stage. It recently overtook the United Kingdom as the world’s fifth-largest economy and China as the world’s most populous country. This year, it holds the G20 presidency.
“Investors do worry about the risk of contagion,” says Charlie Robertson, chief economist of Renaissance Capital, an emerging markets investment bank. “That if there is one company like this, could we find more?
In China, for instance, investors kept investing in real estate companies after Evergrande but later, several other companies turned out to be problematic too,” he said referring to the giant Chinese real estate firm that nearly buckled under enormous debt in the last couple of years, with the risk spilling over to several other real estate firms.
While the scale of the conglomerate owned by Adani, whose meteoric rise to being the world’s third-richest person, can be matched by only a few other companies, the episode has left Indian regulators with a lot to answer.
“This questions the credibility of Indian regulators, just as Wirecard was for German regulators,” says Tim Buckley, director at the Australian think tank Climate Energy Finance, who has tracked the Adani group’s various businesses for many years. Germany’s finance watchdog was heavily criticised for ignoring early warnings about Wirecard, the digital payments firm that was once the darling of the stock markets but blew up in an accounting scandal in 2020.
Adani’s rise
The 60-year-old Gautam Adani is known for being personally modest as much as for his dazzling ambition and success. After a short stint as a trader in Mumbai’s diamond market, still in his twenties, he returned to his home state of Gujarat and began dabbling in business.
In 2002, months after now Prime Minister Narendra Modi became Gujarat’s chief minister, religious riots broke out in the state, with questions arising over Modi’s and the police’s role in the unrest. Soon after, Modi began hosting large global investor conferences, seeking to burnish his state’s image – and his own – with an investor-friendly shine.
With Adani handling the state’s largest port and several other infrastructure projects, the chief minister became known for getting things done.
But even as his fortunes rose, Adani had some close personal shaves. He had been staying in Mumbai’s Taj Mahal Palace hotel when armed men attacked it in 2008. Adani narrowly escaped as the attackers battled the Indian police for days, killing residents and staff before being killed themselves.
Years earlier, Adani had also briefly been kidnapped for ransom before escaping – events that may have encouraged him to keep a low profile. He recently admitted to spending most evenings at his home in Ahmedabad, playing cards with his wife, a trained dentist who now runs the group’s charitable work.
Adani is one of seven siblings, several of whom work in the group, as do both his sons Karan and Jeet. Karan is the chief executive of Adani Ports and SEZ and was recently appointed to Maharashtra state’s economic advisory board.
When Modi became prime minister in 2014, he arrived in New Delhi on Adani’s plane. Since then, Adani has expanded successfully into airports, renewable energy, data centres, defence production and real estate among other sectors. Many of the contracts for such infrastructure projects were won through a competitive bidding process.
“India does not seem to be interested in developing a range of regional infrastructure players,” says Rohit Chandra, assistant professor of public policy at IIT Delhi. “This quest for national champions comes at the cost of regional contractors growing and climbing the ladder of project complexity.”
The crisis
Since 2020, until the Hindenburg report, some Adani group stocks had risen to more than 400 times its per share price. It suggested either that shareholders expected earnings to rise sharply or that the share was trading at a price that was too high. Around then, questions began to swirl about the group’s ownership.
While the Adani family owned stakes to as high a threshold as regulators permitted, the report showed that offshore funds – including in Mauritius, Cyprus and the UK – seemed to also own substantial shares in the group’s companies. Elara, Vespera, Cresta, New Leaina, LTS , APMS, Albula, Asia Investment Corporation and Opal among other such funds had few, if any, other investments.
Hindenburg’s analysis showed that much of the funds of these companies were deployed in Adani stocks, suggesting they may be shell companies. The report traced connections between Gautam Adani’s UAE-based brother, Vinod Adani and several of them.
“When you see such a complex network of offshores companies from a company whose operations are mostly in India, the onus is on the company to say why they exist,” said Climate Energy Finance’s Buckley.
The Hindenburg report alleged these funds accounted for up to 47 percent of the volume in Adani group stocks on some days and were possibly used to drive up stock prices.
“Many of the Vinod Adani-associated entities have no obvious signs of operations, including no reported employees, no independent addresses or phone numbers and no meaningful online presence,” the report said. “Despite this, they have collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure.”
In its public statement, the Adani group said Vinod was not a related party since he did not hold any official positions in the group. A group spokesperson did not respond to an emailed request for comment.
The recent prospectus for Adani Enterprises’s public offering says the country’s stock market regulator, the Securities and Exchange Board of India, had asked the group’s publicly-listed companies for ownership and director details in November 2020, and that the companies had provided these details.
In parliament too, the government said such an investigation was under way but the findings, if any, have not been made public.
Fallout for Adani Group
The stock price of Adani Enterprises fell from 3,442 rupees ($41.5) on January 24, when the Hindenburg report came out, to 1,562 rupees ($18.8) within days before recovering to 1,983 rupees ($23.9) on February 8 as the company tried to soothe investor confidence by prepaying more than $1.1bn in bonds. It also announced that some of its pledged shares had been released.
The Adani group has faced sustained campaigns by environmental activists against its coal mining projects in India and Australia [File: Lisa Maree Williams/Getty Images]
But by then, Credit Suisse, Citigroup and Standard Chartered banks had stopped accepting Adani bonds as collateral and ratings agency S&P had downgraded Adani Ports and Adani Electricity to negative.
The downgrade came due to “governance risks and funding challenges for the larger Adani group”, the report said. S&P also removed Adani Enterprises from its Dow Jones Sustainability Indices, raising challenges in getting green funding, a key to its planned move from coal to renewable energy.
The company has faced sustained campaigns by environmental activists against its coal mining projects in India and Australia. They now cite the Hindenburg report to say the related party transactions indicate the walls between its renewable and coal businesses may not be strong enough.
In 2021, the Adani group shifted ownership of the Bowen Rail Company, the coal haulage component of the Adani Carmichael thermal coal project, from Adani Ports to Adani Enterprises “to fulfil Carbon Neutral Commitments”, said Will Van De Pol, a campaigner for Market Forces, an Australian group that lobbies banks to make green investments.
“Asset transfers are being used to obscure connections to the company’s coal expansion plans, highlighting the need for investors to steer clear of the entire Adani group.”
Fallout for regulators
The Adani crisis and its fallout on regulatory agencies and the government is being debated in the Indian parliament. Opposition parties have called for a parliamentary investigation into the group. Investors, too, say it is needed to restore confidence.
“We would like to see a credible investigation by Indian authorities. That is the best way to put Indian and international investor concerns to rest,” says Renaissance Capital’s Charlie Robertson.
So far, the government has not announced new investigations into Adani group stocks and holdings. In a speech in parliament on Wednesday, Modi said that “the 2030s would be India’s decade”, but hardly addressed the Adani stock crash.
“The regulator has to do its own homework and then take action and not just react based on social media,” said JN Gupta, managing director of Stakeholder Empowerment Services, an adviser on corporate governance.
An investigation could also bolster the government’s efforts, through its G20 presidency and outside, to attract both foreign direct investment and investment in its markets.
With China having undergone long COVID lockdowns and a trade war with the United States, India seemed an increasingly attractive destination. A day before the Hindenburg report was released, India’s commerce minister Piyush Goyal said Apple was planning to increase its manufacturing in India, aiming to make up to 25 percent of its phones in the nation, up from the current 5 percent.
But Renaissance Capital’s Robertson says: “Three months ago, there was a lot of investment coming into India and China was looking risky. Today that has changed.”
In India itself, one likely impact of the report could be the slowing down of the slew of infrastructure projects the Adani group has contracts for.
“Delaying, discarding, and rebidding projects are part of the infrastructure development process in most developing countries,” says IIT Delhi’s Chandra. “It is quite likely that the Adani group will consolidate, reprioritise and possibly scale back some of its project ambitions after its losses in the last few weeks.”
That could be the delaying of the Indian dream itself.
NEW YORK — Wall Street is drifting lower on Friday as stocks head toward the close of their worst week since December.
The S&P 500 was little changed in morning trading and on pace for a 1.3% loss for the week. The Dow Jones Industrial Average was up 41 points, or 0.1%, at 33,747, as of 10:09 a.m. Eastern time, while the Nasdaq composite was 0.6% lower.
Stocks have been struggling since rallying at the start of the year on hopes that the economy could avoid a severe recession and that cooling inflation could get the Federal Reserve to take it easier on interest rates. Since late last week, worries have risen that a still-strong jobs market could up the pressure on inflation and keep the Fed on track to leave rates at the higher-for-longer level that it’s been talking about.
Higher rates can drive down inflation but they also raise the risk of a recession and drag down investment prices. And central banks around the world are intent on raising rates, even if at a slower pace than before.
“For most central banks the risk is that they have tightened too little, not too much,” economists led by Ethan Harris wrote in a BofA Global Research report.
“The ultimate gauge of success here is not avoiding a recession, but getting inflation on a path back to target,” Harris wrote.
The worries about rates mean much of Wall Street’s action has been in the bond market, where yields have climbed on expectations for a firmer Fed.
The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.70% from 3.66% late Thursday. The two-year yield, which moves more on expectations for the Fed, ticked up to 4.50% from 4.48%. It was at 4.08% just over a week ago and is near its highest level since November.
One area the Fed has focused on keeping under control is expectations for inflation among U.S. households. If those took off, the fear is that it could create a self-reinforcing cycle that only worsens inflation.
A preliminary report on Friday showed that expectations for year-ahead inflation rose to 4.2% from from 3.9% in January, according to the University of Michigan. But that’s also down from 4.4% in December.
Companies have also in recent weeks been delivering a mixed set of earnings reports for the end of 2022. Lyft tumbled 35% following its latest report. The ride-hailing company gave a forecast for revenue in the first three months of 2023 that fell short of analysts’ expectations.
Newell Brands, whose brands include Sharpie markers and Calphalon cookware, fell 6.3% despite reporting stronger revenue and profit for the latest quarter than analysts expected. Forecasts for revenue and earnings this upcoming year were below analysts’ forecasts.
Given worries about still-high inflation and a slowing economy eating into corporate profits, analysts have been cutting their forecasts for upcoming earnings for companies. So far this year, analysts have cut their expectations for S&P 500 companies’ first-quarter earnings by 4.5%, according to strategists at Credit Suisse. That’s a deeper cut than average.
Expedia lost 6.9% after reporting weaker profit and revenue for the latest quarter than expected.
Oil prices rose after Russia announced Friday that it will cut oil production by 500,000 barrels per day next month. Western countries had capped the price of Russia’s crude over its invasion of Ukraine. Brent crude, the international standard, rose 1.5% to $85.79 per barrel.
Benchmark U.S. crude added 1.6% to $79.27 per barrel.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
LOUISVILLE, Ky. — Producers of spirits have new bragging rights in the age-old whiskey vs. beer barroom debate.
New figures show that spirits surpassed beer for U.S. market-share supremacy, based on supplier revenues, a spirit industry group announced Thursday.
The rise to the top for spirit-makers was fueled in part by the resurgent cocktail culture — including the growing popularity of ready-to-drink concoctions — as well as strong growth in the tequila and American whiskey segments, the Distilled Spirits Council of the United States said.
In 2022, spirits gained market share for the 13th straight year in the fiercely competitive U.S. beverage alcohol market, as its supplier sales reached 42.1%, the council said.
After years of steady growth, it marked the first time that spirit supplier revenues have surpassed beer — but just barely, the spirit industry group said. Beer holds a 41.9% market share, it said.
“Despite the tough economy, consumers continued to enjoy premium spirits and fine cocktails in 2022,” Distilled Spirits Council President and CEO Chris Swonger said.
Overall spirit supplier sales in the U.S. were up 5.1% in 2022 to a record $37.6 billion, the group said. Volumes rose 4.8% to 305 million 9-liter cases.
Seemingly unfazed, Brian Crawford, president and CEO of the Beer Institute, insisted that beer “remains America’s number one choice in beverage alcohol.”
“It’s interesting to hear liquor companies boast about making money hand-over-fist while simultaneously going state-to-state hunting for more tax carveouts from state legislatures,” Crawford said in a statement.
Benj Steinman, president of Beer Marketer’s Insights, a leading beer industry trade publication, said the beer industry saw unprecedented growth in the 1970s, growing at a pace of 4% annually. As recently as 2000, beer’s share in the alcohol market was 58%.
Over the past several decades, beer’s growth has essentially been flat. Meanwhile, spirits have flourished, especially over the past two decades.
“I think there’s just a long arc on these things,” Steinman said.
Steinman and Bart Watson, chief economist at the Brewers Association, a craft beer industry trade group, agreed there are several reasons for the shift to spirits.
“Some of it’s just the younger generation coming up, looking for a lot of variety,” Steinman said. “They sometimes like spirits. Cocktail culture is another thing.”
Watson cited data showing that liquor has become 20% cheaper relative to beer in recent decades.
“Price is a particularly large part of the story,” he said.
Another factor is advertising and marketing. Watson pointed to the success of spirits in its outreach to women. Steinman said distilled spirits now advertise freely, something they didn’t do generations ago.
“They’ve increased their availability. They’ve increased their ability to advertise. They’ve had a lot of legislative and policy wins that have enabled growth for distilled spirits,” Steinman said.
For spirit producers, reaching the market share milestone was worth toasting.
At Baltimore Spirits Company in Maryland, the head distiller and the manager of its cocktail bar said they are pleased with the rise in the consumption of spirits.
Eli Breitburg-Smith, head distiller and cofounder, said the distillery founders saw a space in the market to make rye whiskey as consumer demand was growing.
“We did see that it was going to be on the rise,” he said. “Now, I don’t know that we thought it would be overtaking beer or anything like that, but we felt like there was a good space in the market for new whiskey, original whiskey, and people that … were making a unique product.”
Gregory Mergner, the general manager of the distillery’s cocktail gallery, said he didn’t anticipate spirits rivaling or surpassing beer for market share.
“As ubiquitous as beer is. I don’t think anybody could have foreseen whiskey overtaking it,” he said.
The spirit sector’s rise has coincided with a growing thirst for high-end, super-premium products.
That trend toward premiumization slowed overall in 2022. But it remained strong because of growth in the tequila/mezcal and American whiskey categories, the Distilled Spirits Council said.
More than 60% of the spirit sector’s total U.S. revenue last year came from sales of high-end and super-premium spirits, mostly led by tequila and American whiskey, said Christine LoCascio, the group’s chief of public policy and strategy. Those high-end products fetch the highest prices.
“While many consumers are feeling the pinch from inflation and reduced disposable income, they are still willing to purchase that special bottle of spirits choosing to sip a little luxury and drink better, not more,” LoCascio said.
Within the spirit sector, vodka maintained its as status the top revenue producer at $7.2 billion, though sales were flat in 2022, the group said.
In the tequila/mezcal category, sales rose 17.2%, or $886 million, totaling $6 billion, it said.
Sales for American whiskey were up 10.5%, or $483 million, to reach $5.1 billion, it said. The American whiskey category includes bourbon, Tennessee whiskey and rye whiskey.
Brandy and cognac sales were down 12.3%, with revenues totaling $3.1 billion.
Premixed cocktails were the clear leader as the fastest-growing spirit category.
Sales for premixed cocktails, including ready-to-drink spirit products, surged by 35.8%, or $588 million, to reach $2.2 billion, the council said.
Meanwhile, spirit sales volumes in restaurants and bars — referred to as on-premise sales — continued to recover from pandemic-era shutdowns but they remained 5% lower than 2019 levels, the council said. Those sales represent about 20% of the U.S. market.
Off-premise sales volumes at liquor stores and other retail outlets remained steady in 2021 and 2022, after experiencing sharp gains during the pandemic restrictions in 2020, it said.
Meanwhile, there is a crossover strategy brewing in the alcohol market.
Steinman said that even the big players in the beer industry “are playing in all these different growth arenas, including spirits.”
Molson Coors changed its name in 2019, going from Molson Coors Brewing Co. to Molson Coors Beverage Co. Watson noted that the No. 2 canned ready-to-drink liquor product, Cutwater, is made by Anheuser-Busch InBev.
For beer producers, the reversal in market-share rankings is no reason to cry in their suds.
Watson cautioned that the market share trend could flip, calling it “likely at some point we’ll see beer grow again at the expense of other segments.”
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Salter reported from St. Louis. Associated Press photojournalist Julio Cortez in Baltimore contributed to this report.
Wall Street gave back some of its recent gains Wednesday as uncertainty about interest rates and inflation continued to reign.
The losses followed another mixed set of earnings reports. Chipotle Mexican Grill sank after delivering weaker results for the latest quarter than expected, while disappointing forecasts for upcoming results knocked other stocks lower.
CVS Health climbed after turning in stronger profits than Wall Street had forecast. Treasury yields held relatively steady.
On Wednesday:
The S&P 500 fell 46.14 points, or 1.1%, to 4,117.86
The Dow Jones Industrial Average fell 207.68 points, or 0.6%, to 33,949.01.
The Nasdaq composite fell 203.27 points, or 1.7%, to 11,910.52.
The Russell 2000 index of smaller companies fell 30.01 points, or 1.5%, to 1,942.60.
BEIJING — Asian stock markets sank Monday after strong U.S. jobs data fanned fears of more interest rate hikes to cool inflation.
Shanghai, Hong Kong and Seoul retreated. Tokyo gained. Oil prices rose.
Wall Street wilted Friday after official data showed U.S. employers hired twice as many people in January as the previous month. That was good news for workers but dampened hopes the Federal Reserve might decide no more rate increases are needed to slow economic activity.
The numbers “look set to inevitably burst the bubble on Fed pivot bets” because they “suggest a re-acceleration in wage pressures,” said Tan Boon Heng of Mizuho Bank in a report.
The Shanghai Composite Index fell 0.8% to 3,237.36 while the Nikkei 225 in Tokyo advanced 0.6% to 27,671.02. The Hang Seng in Hong Kong sank 2% to 21,230.81.
The Kospi in Seoul declined 1.1% to 2,452.55 and Sydney’s S&P-ASX 200 retreated 0.3% to 7,539.00.
India’s Sensex opened down 0.6% at 60,472.35. Southeast Asian markets declined. New Zealand markets were closed for a holiday.
On Wall Street, the benchmark S&P 500 fell 1% on Friday to 4,136.48 after the government reported the economy added 517,000 jobs in January. That was double December’s 260,000 and more than double the 185,000 expected by economists.
Despite that, the S&P 500 turned in its fourth weekly gain in the past five. It is 15.6% above its low point in October.
Average hourly wages were 4.4% higher in January than a year earlier. That was lower than December’s 4.8% raise but above expectations. Central bankers worry wage growth can push up consumer prices.
The data dampened investor hopes that lower inflation might persuade the Fed and other central banks to ease off plans for more rate increases. They worry central bankers might be willing to tip the global economy into recession to stop inflation that is near multi-decade highs.
Some traders expect the Fed to cut rates late this year, despite warnings by officials that more increases are planned. Officials of the European Central Bank have issued similar warnings.
The Dow Jones Industrial Average dropped 0.4%to 33,926.01. The Nasdaq composite sank 1.6% to 12,006.96.
Also Friday, a separate report showed U.S. service industries returned to growth in January. It was a stronger reading than expected but suggested pricing pressures may be easing.
In energy markets, U.S. benchmark crude gained 23 cents to $73.62 per barrel in electronic trading on the New York Mercantile Exchange. The contract tumbled $2.49 on Friday to $73.39. Brent crude, the price basis for international oil trading, advanced 34 cents to $80.28 per barrel in London. It lost $2.23 the previous session to $79.94.
The dollar rose to 131.70 yen from Friday’s 131.07 yen. The euro fell to $1.0796 from $1.0805.
