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  • Japan’s Cabinet OKs record defense budget that aims to deter China

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    Japan’s Cabinet on Friday approved a record defense budget plan exceeding 9 trillion yen ($58 billion) for the coming year, aiming to fortify its strike-back capability and coastal defense with cruise missiles and unmanned arsenals as tensions rise in the region.The draft budget for fiscal 2026, beginning April, is up 9.4% from 2025 and marks the fourth year of Japan’s ongoing five-year program to double annual arms spending to 2% of gross domestic product.“It is the minimum needed as Japan faces the severest and most complex security environment in the postwar era,” Defense Minister Shinjiro Koizumi said, stressing his country’s determination to pursue military buildup and protect its people.“It does not change our path as a peace-loving nation,” he said.The increase comes as Japan faces elevated tension from China. Japanese Prime Minister Sanae Takaichi said in November that her country’s military could get involved if China were to take action against Taiwan, the self-governing island that Beijing says must come under its rule.Takaichi’s government, under U.S. pressure for a military increase, pledged to achieve the 2% target by March, two years earlier than planned. Japan also plans to revise its ongoing security and defense policy by December 2026 to further strengthen its military.Missiles and drones will add to southwestern island defenseJapan has been bolstering its offensive capability with long-range missiles to attack enemy targets from a distance, a major break from its post-World War II principle limiting the use of force to its own self-defense.The current security strategy, adopted in 2022, names China as the country’s biggest strategic challenge and calls for a more offensive role for Japan’s Self-Defense Force under its security alliance with the U.S.The new budget plan allocates more than 970 billion yen ($6.2 billion) to bolster Japan’s “standoff” missile capability. It includes a 177 billion yen ($1.13 billion) purchase of domestically developed and upgraded Type-12 surface-to-ship missiles with a range of about 1,000 kilometers (620 miles).The first batch of the Type-12 missiles will be deployed in Japan’s southwestern Kumamoto prefecture by March, a year earlier than planned, as Japan accelerates its missile buildup in the region.The government believes unmanned weapons are essential, in part due to Japan’s aging and declining population and its struggles with an understaffed military.To defend the coasts, Japan will spend 100 billion yen ($640 million) to deploy “massive” unmanned air, sea-surface and underwater drones for surveillance and defense under a system called SHIELD planned for March 2028, defense ministry officials said.For speedier deployment, Japan initially plans to rely mainly on imports, possibly from Turkey or Israel.Tension with China growsThe budget announcement comes as Japan’s row with China escalates following Takaichi’s remark in November that the Japanese military could get involved if China were to take action against Taiwan, the self-governing island that Beijing claims as its own.The disagreement escalated this month when Chinese aircraft carrier drills near southwestern Japan prompted Tokyo to protest when Chinese aircraft locked their radar on Japanese aircraft, which is considered possible preparation for firing missiles.The Defense Ministry, already alarmed by China’s rapid expansion of operations in the Pacific, will open a new office dedicated to studying operations, equipment and other necessities for Japan to deal with China’s Pacific activity.Two Chinese aircraft carriers were spotted in June, almost simultaneously operating near the southern Japanese island of Iwo Jima for the first time, fueling Tokyo’s concern about Beijing’s rapidly expanding military activity far beyond its borders and areas around the disputed East China Sea islands.In Beijing, China’s Foreign Ministry spokesperson Lin Jian said the Takaichi government has “noticeably accelerated its pace of military buildup and expansion” since taking office.”Japan is deviating from the path of peaceful development it has long claimed to uphold and is moving further and further in a dangerous direction,” Lin said.Japan plans joint development of frigates and jetsJapan is pushing to strengthen its largely domestic defense industry by participating in joint development with friendly nations and promoting foreign sales after drastically easing arms export restrictions in recent years.For 2026, Japan plans to spend more than 160 billion yen ($1 billion) to jointly develop a next-generation fighter jet with Britain and Italy for deployment in 2035. There are also plans for research and development of artificial intelligence-operated drones designed to fly with the jet.In a major boost to the country’s defense industry, Australia selected Mitsubishi Heavy Industries in August to upgrade the Mogami-class frigate to replace its fleet of 11 ANZAC-class ships.Japan’s budget allocates nearly 10 billion yen ($64 million) to support industry base and arms sales.Meeting targets but future funding uncertainThe budget plan requires parliamentary approval by March to be implemented as part of a 122.3 trillion yen ($784 billion) national budget bill.The five-year defense buildup program would bring Japan’s annual spending to around 10 trillion yen ($64 billion), making it the world’s third-largest spender after the U.S. and China. Japan will clear the 2% target by March as promised, the Finance Ministry said.Takaichi’s government plans to fund its growing military spending by raising corporate and tobacco taxes and recently adopted a plan for an income tax increase beginning in 2027. Prospects for future growth at a higher percentage of GDP are unclear.

    Japan’s Cabinet on Friday approved a record defense budget plan exceeding 9 trillion yen ($58 billion) for the coming year, aiming to fortify its strike-back capability and coastal defense with cruise missiles and unmanned arsenals as tensions rise in the region.

    The draft budget for fiscal 2026, beginning April, is up 9.4% from 2025 and marks the fourth year of Japan’s ongoing five-year program to double annual arms spending to 2% of gross domestic product.

    “It is the minimum needed as Japan faces the severest and most complex security environment in the postwar era,” Defense Minister Shinjiro Koizumi said, stressing his country’s determination to pursue military buildup and protect its people.

    “It does not change our path as a peace-loving nation,” he said.

    The increase comes as Japan faces elevated tension from China. Japanese Prime Minister Sanae Takaichi said in November that her country’s military could get involved if China were to take action against Taiwan, the self-governing island that Beijing says must come under its rule.

    Takaichi’s government, under U.S. pressure for a military increase, pledged to achieve the 2% target by March, two years earlier than planned. Japan also plans to revise its ongoing security and defense policy by December 2026 to further strengthen its military.

    Missiles and drones will add to southwestern island defense

    Japan has been bolstering its offensive capability with long-range missiles to attack enemy targets from a distance, a major break from its post-World War II principle limiting the use of force to its own self-defense.

    The current security strategy, adopted in 2022, names China as the country’s biggest strategic challenge and calls for a more offensive role for Japan’s Self-Defense Force under its security alliance with the U.S.

    The new budget plan allocates more than 970 billion yen ($6.2 billion) to bolster Japan’s “standoff” missile capability. It includes a 177 billion yen ($1.13 billion) purchase of domestically developed and upgraded Type-12 surface-to-ship missiles with a range of about 1,000 kilometers (620 miles).

    The first batch of the Type-12 missiles will be deployed in Japan’s southwestern Kumamoto prefecture by March, a year earlier than planned, as Japan accelerates its missile buildup in the region.

    The government believes unmanned weapons are essential, in part due to Japan’s aging and declining population and its struggles with an understaffed military.

    To defend the coasts, Japan will spend 100 billion yen ($640 million) to deploy “massive” unmanned air, sea-surface and underwater drones for surveillance and defense under a system called SHIELD planned for March 2028, defense ministry officials said.

    For speedier deployment, Japan initially plans to rely mainly on imports, possibly from Turkey or Israel.

    Tension with China grows

    The budget announcement comes as Japan’s row with China escalates following Takaichi’s remark in November that the Japanese military could get involved if China were to take action against Taiwan, the self-governing island that Beijing claims as its own.

    The disagreement escalated this month when Chinese aircraft carrier drills near southwestern Japan prompted Tokyo to protest when Chinese aircraft locked their radar on Japanese aircraft, which is considered possible preparation for firing missiles.

    The Defense Ministry, already alarmed by China’s rapid expansion of operations in the Pacific, will open a new office dedicated to studying operations, equipment and other necessities for Japan to deal with China’s Pacific activity.

    Two Chinese aircraft carriers were spotted in June, almost simultaneously operating near the southern Japanese island of Iwo Jima for the first time, fueling Tokyo’s concern about Beijing’s rapidly expanding military activity far beyond its borders and areas around the disputed East China Sea islands.

    In Beijing, China’s Foreign Ministry spokesperson Lin Jian said the Takaichi government has “noticeably accelerated its pace of military buildup and expansion” since taking office.

    “Japan is deviating from the path of peaceful development it has long claimed to uphold and is moving further and further in a dangerous direction,” Lin said.

    Japan plans joint development of frigates and jets

    Japan is pushing to strengthen its largely domestic defense industry by participating in joint development with friendly nations and promoting foreign sales after drastically easing arms export restrictions in recent years.

    For 2026, Japan plans to spend more than 160 billion yen ($1 billion) to jointly develop a next-generation fighter jet with Britain and Italy for deployment in 2035. There are also plans for research and development of artificial intelligence-operated drones designed to fly with the jet.

    In a major boost to the country’s defense industry, Australia selected Mitsubishi Heavy Industries in August to upgrade the Mogami-class frigate to replace its fleet of 11 ANZAC-class ships.

    Japan’s budget allocates nearly 10 billion yen ($64 million) to support industry base and arms sales.

    Meeting targets but future funding uncertain

    The budget plan requires parliamentary approval by March to be implemented as part of a 122.3 trillion yen ($784 billion) national budget bill.

    The five-year defense buildup program would bring Japan’s annual spending to around 10 trillion yen ($64 billion), making it the world’s third-largest spender after the U.S. and China. Japan will clear the 2% target by March as promised, the Finance Ministry said.

    Takaichi’s government plans to fund its growing military spending by raising corporate and tobacco taxes and recently adopted a plan for an income tax increase beginning in 2027. Prospects for future growth at a higher percentage of GDP are unclear.

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  • Stocks Pare Losses as Japan Rebounds, Dollar Dips: Markets Wrap

    Stocks Pare Losses as Japan Rebounds, Dollar Dips: Markets Wrap

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    (Bloomberg) — Asian equities pared early losses Thursday, continuing a bout of volatile trading as investors digest signals from central banks on the path ahead for interest rates.

    Most Read from Bloomberg

    Benchmarks in Australia, South Korea, Taiwan and China dropped, with tech giants among the hardest hit. A region-wide gauge of the tech sector fell by around 2%, with the likes of SK Hynix Inc. down as much as 4.8% and Taiwan Semiconductor Manufacturing Co. falling as much as 2.8%. That followed a 1.2% drop for the tech-heavy Nasdaq 100 Index on Wednesday.

    Japan’s Topix Index rebounded from a loss of as much as 1.8%, and the yen eraased an advance of up to 0.9%. A Thursday summary of opinions from last week’s Bank of Japan meeting, when it raised rates, showed one member identify the neutral rate at 1%, while another called for timely rate increases to avoid rapid hikes.

    Global markets have been rocked in the past week as investors prepare for the US and Japanese central banks to move in opposite directions, in turn undermining the yen’s role as a cheap source of funding for financial assets.

    The unspooling of the carry trade has further room to run but the declining velocity of the shift allows investors to breathe “a sigh of relief,” according to Quincy Krosby at LPL Financial. “A softer dollar, driven by the markets perception that the Fed will soon initiate an easing cycle, should help support a stronger yen — a negative for the trade.”

    Three-quarters of the carry trade has been unwound as the recent slump wiped out all positive year-to-date returns, according to strategists at JPMorgan Chase & Co.

    The dollar was slightly weaker Thursday, partly reversing moves from the prior session. Lackluster demand for a 10-year Treasury auction and $31.8 billion in debt offerings from blue-chip companies were headwinds.

    The Treasury auction result is “consistent with our view that we’re due for a continued correction higher in yield in the near-term,” said Zachary Griffiths, head of US investment grade and macro strategy at CreditSights. “The repricing following what was really just a moderately weak payrolls report seems way overdone.”

    US Markets

    The S&P 500 closed 0.8% lower as Nvidia Corp. led losses in megacaps. Super Micro Computer Inc. tumbled 20% on disappointing earnings. In late trading, Warner Bros. Discovery Inc., the parent of CNN and TNT, plunged after posting a charge of $9.1 billion as it wrote down the value of its traditional TV networks.

    Shares in Sony rallied Thursday after the Japanese consumer electronics company boosted its operating income guidance for the full year.

    Markets have been in a tailspin since weak economic data last week fueled worries that the Federal Reserve’s decision to hold rates at a two-decade high is risking a deeper economic slowdown.

    JPMorgan economists now see a 35% chance that the US economy tips into a recession by the end of this year, up from 25% as of the start of last month.

    “Stocks remain vulnerable,” said Fawad Razaqzada at City Index and Forex.com. “More evidence of a bottom is needed to excite the bulls again. Overall, sentiment remained cagey. Not many people were confident to buy this latest dip, especially with US CPI looming next week.”

    Oil climbed as investors remained on edge over the possibility of a retaliatory strike from Iran on Israel. Gold rose for the first time in six sessions.

    Key events this week:

    • Germany industrial production, Thursday

    • US initial jobless claims, Thursday

    • Fed’s Thomas Barkin speaks, Thursday

    • China PPI, CPI, Friday

    Some of the main moves in markets:

    Stocks

    • S&P 500 futures were little changed as of 11:29 a.m. Tokyo time

    • Japan’s Topix rose 0.2%

    • Australia’s S&P/ASX 200 fell 0.3%

    • Hong Kong’s Hang Seng fell 0.3%

    • The Shanghai Composite fell 0.4%

    • Euro Stoxx 50 futures fell 0.9%

    • Nasdaq 100 futures rose 0.3%

    Currencies

    • The Bloomberg Dollar Spot Index was little changed

    • The euro was little changed at $1.0930

    • The Japanese yen was little changed at 146.65 per dollar

    • The offshore yuan was little changed at 7.1812 per dollar

    • The Australian dollar rose 0.3% to $0.6540

    Cryptocurrencies

    • Bitcoin rose 4.5% to $57,637.55

    • Ether rose 4.8% to $2,463.01

    Bonds

    • The yield on 10-year Treasuries declined two basis points to 3.92%

    • Japan’s 10-year yield advanced two basis points to 0.895%

    • Australia’s 10-year yield advanced two basis points to 4.09%

    Commodities

    • West Texas Intermediate crude rose 0.5% to $75.57 a barrel

    • Spot gold rose 0.2% to $2,388.37 an ounce

    This story was produced with the assistance of Bloomberg Automation.

    Most Read from Bloomberg Businessweek

    ©2024 Bloomberg L.P.

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  • Crypto market cap hovers $2.45t as Bitcoin, Solana, Ethereum, Dogecoin face downward pressure

    Crypto market cap hovers $2.45t as Bitcoin, Solana, Ethereum, Dogecoin face downward pressure

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    Digital assets continue to struggle as the crypto market cap dips 1.28%. It currently hovers at around $2.45 trillion — a 94.5% change one year ago.

    In what could be a knock-on effect from the traditional market, which saw the Japanese yen tumble to a 34-year low against the U.S. dollar, leading cryptocurrencies such as Bitcoin (BTC), Solana (SOL), and Dogecoin (DOGE) all saw their prices drop in the last 24 hours. 

    Bitcoin

    Per data from CoinMarketCap, Bitcoin is currently priced at $63,284, which is a 2.32% drop from 24 hours ago.

    In that period, the number one crypto recorded a trading volume of $22.89 billion, which was the second-highest amount in the last 24 hours.

    BTC 24-hr price chart | Source: CoinMarketCap

    While Bitcoin’s price is still more than 118% higher than it was at the same point a year ago, it is in the red over several other time frames.

    For instance, the current price signifies a 10% dip over 30 days, a 6.7% drop across a fortnight, and a more modest 1.3% loss in the last seven days.

    Solana 

    On its part, Solana — fifth on the list of the biggest cryptocurrencies by market cap — saw its price go down by more than 4% in 24 hours.

    Currently, the coin is changing hands at $137.21 and has a 24-hour trading volume just north of $2.4 billion.

    Crypto market cap hovers $2.45t as Bitcoin, Solana, Ethereum, Dogecoin face downward pressure - 2
    SOL 24-hr price chart | Source: CoinMarketCap

    SOL has not fared any better over different time frames either.

    The current price represents a 25.6% drop from where it was 30 days ago, per data from CoinGecko.

    It also marks a nearly 8% dip across 14 days, as well as a 2.6% loss over 7 days.

    Ethereum

    Ethereum seems to have bucked the general negative trend, albeit rather modestly. At the time of writing, it was trading at about $3,137, which is a 0.23% uptick over the last day.

    The slight bump was accompanied by a 24-hour trading volume of $10.26 billion, making ETH the third most traded cryptocurrency after Tether and Bitcoin.

    Crypto market cap hovers $2.45t as Bitcoin, Solana, Ethereum, Dogecoin face downward pressure - 3
    ETH 24-hr price chart | Source: CoinMarketCap

    Ethereum’s gains over seven days are more significant, with the current price being a 4% improvement on where it was a week ago.

    However, the bearish sentiment that seems to have washed over the crypto market in the last month has not spared ETH either. It has lost more than 12% of its value in that time.

    Dogecoin

    Dogecoin — the largest meme token — also shed some of its value in the last 24 hours.

    The dog-themed coin shed nearly 3% of its price in that time. Trading at about $0.1451, Dogecoin’s value is also more than 30% lower than its level from a month ago.

    Crypto market cap hovers $2.45t as Bitcoin, Solana, Ethereum, Dogecoin face downward pressure - 4
    DOGE 24-hr price chart | Source: CoinMarketCap

    Its performance is reflected among other meme coins, including Pepe (PEPE), Dogwifhat (WIF), and Shiba Inu (SHIB), which are all currently in the red, with losses ranging between 2.82% and 7.87%. 

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    Julius Mutunkei

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  • Hang Seng leads selloff for Asia stocks, with 4% slump after China data

    Hang Seng leads selloff for Asia stocks, with 4% slump after China data

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    TOKYO (AP) — Asian shares slid Wednesday after a decline overnight on Wall Street and disappointing China growth data, while Tokyo’s main benchmark momentarily hit another 30-year high.

    Japan’s benchmark Nikkei 225
    NIY00,
    -0.95%

    reached a session high of 36,239.22, but reverted lower, last down 0.3% to 35,477. The Nikkei has been hitting new 34-year highs, or the best since February 1990 during the so-called financial bubble. Buying focused on semiconductor-related shares, and a cheap yen helped boost exporter issues.

    Don’t miss: Wall Street firms catch up to Buffett enthusiasm on Japan as Nikkei keeps hitting records

    Hong Kong’s Hang Seng
    HK:HSCI
    tumbled 4% to 15,220.72, with losses building after data showed China hitting its economic growth target of 5.2% for 2023, surpassing government expectations, but short of the 5.3% some analysts expected. The Shanghai Composite
    CN:SHCOMP
    shed 2% to 2,833.62.

    Read on: China hit its economic-growth target without ‘massive stimulus,’ boasts Premier Li Qiang

    Australia’s S&P/ASX 200
    AU:ASX10000
    slipped 0.2% to 7,401.30. South Korea’s Kospi
    KR:180721
    dropped 2.4% to 2,435.90.

    Investors were keeping their eyes on upcoming earnings reports, as well as potential moves by the world’s central banks, to gauge their next moves.
    Wall Street slipped in a lackluster return to trading following a three-day holiday weekend.

    See: What’s next for stocks as ‘tired’ market stalls in 2024 ahead of closely watched retail sales

    The S&P 500
    SPX
    fell 17.85 points, or 0.4%, to 4,765.98. The Dow Jones Industrial Average
    DJIA
    dropped 231.86, or 0.6%, to 37,361.12, and the Nasdaq
    COMP
    sank 28.41, or 0.2%, to 14,944.35.

    Spirit Airlines
    SAVE,
    -47.09%

    lost 47.1% after a U.S. judge blocked its takeover by JetBlue Airways
    JBLU,
    +4.91%

    on concerns it would mean higher airfares for flyers. JetBlue rose 4.9%.

    Stocks of banks were mixed, meanwhile, as earnings reporting season ramps up for the final three months of 2023. Morgan Stanley
    MS,
    -4.16%

    sank 4.2% after it said a legal matter and a special assessment knocked $535 million off its pretax earnings, while Goldman Sachs
    GS,
    +0.71%

    edged 0.7% higher after reporting results that topped Wall Street’s forecasts.

    Companies across the S&P 500 are likely to report meager growth in profits for the fourth quarter from a year earlier, if any, if Wall Street analysts’ forecasts are to be believed. Earnings have been under pressure for more than a year because of rising costs amid high inflation.

    But optimism is higher for 2024, where analysts are forecasting a strong 11.8% growth in earnings per share for S&P 500 companies, according to FactSet. That, plus expectations for several cuts to interest rates by the Federal Reserve this year, have helped the S&P 500 rally to 10 winning weeks in the last 11. The index remains within 0.6% of its all-time high set two years ago.

    Treasury yields
    BX:TMUBMUSD10Y
    have already sunk on expectations for upcoming cuts to interest rates, which traders believe could begin as early as March. It’s a sharp turnaround from the past couple years, when the Federal Reserve was hiking rates drastically in hopes of getting high inflation under control.

    The Tell: No rate cuts in 2024? Why investors should think about the ‘unthinkable.’

    Easier rates and yields relax the pressure on the economy and financial system, while also boosting prices for investments. And for the past six months, interest rates have been the main force moving the stock market, according to Michael Wilson, strategist at Morgan Stanley.

    He sees that dynamic continuing in the near term, with the “bond market still in charge.”

    For now, traders are penciling in many more cuts to rates through 2024 than the Fed itself has indicated. That raises the potential for big market swings around each speech by a Fed official or economic report.

    Yields rose in the bond market after Fed governor Christopher Waller said in a speech that “policy is set properly” on interest rates. Following the speech, traders pushed some bets for the Fed’s first cut to rates to happen in May instead of March.

    On Wall Street, Boeing fell to one of the market’s sharper losses as worries continue about troubles for its 737 Max 9 aircraft following the recent in-flight blowout of an Alaska Air
    ALK,
    -2.13%

    jet. Boeing
    BA,
    -7.89%

    lost 7.9%.

    In energy trading, benchmark U.S. crude
    CL00,
    -1.55%

    lost 90 cents to $71.75 a barrel. Brent crude
    BRN00,
    -1.37%
    ,
    the international standard, fell 78 cents to $77.68 a barrel.

    In currency trading, the U.S. dollar
    USDJPY,
    +0.44%

    rose to 147.90 Japanese yen from 147.09 yen. The euro
    EURUSD,
    -0.10%

    cost $1.0868, down from $1.0880.

    MarketWatch contributed to this report

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  • Asian stocks moving lower in wake of latest volatile session on Wall Street

    Asian stocks moving lower in wake of latest volatile session on Wall Street

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    TOKYO (AP) — Asian shares were mostly lower on Wednesday following another volatile day on Wall Street, as traders braced for updates on inflation and corporate earnings.

    Benchmarks fell in Tokyo
    NIY00,
    +0.09%
    ,
    Shanghai
    SHCOMP,
    -1.12%

    and Hong Kong
    HSI00,
    -2.90%

    but rose in Sydney.

    South Korea’s Kospi
    180721,
    +0.34%

    lost 0.1% to 2,189.86 after the Bank of Korea raised its key rate by 0.5 percentage point, amid the backdrop of Fed rate hikes in the U.S. and growing inflation risks from the weak won and rebounding global oil prices.

    In currency trading the Japanese yen declined to a 24-year low against the U.S. dollar
    JPYUSD,
    -0.24

    at 146 yen-levels, raising expectations of another intervention by Tokyo to prop up the yen. By midday the dollar
    USDJPY,
    +0.24%

    was at 146.17 yen, up from 145.80 late Tuesday. The euro
    EURUSD,
    +0.12%

    cost 96.96 cents, inching down from 97.07 yen.

    The weaker yen raises costs for both consumers and businesses who rely on imports of food, fuel and other needs, but the bigger purchasing power for foreign currencies is expected to boost tourism. Japan reopened fully to individual tourist travel this week after being closed for more than two years because of the pandemic.

    Japan’s benchmark Nikkei 225 lost 0.2% to 26,348.73 in morning trading. Australia’s S&P/ASX 200
    ASX10000,
    -1.54%

    gained nearly 0.2% to 6,656.00. Hong Kong’s Hang Seng slipped 2% to 16,491.39, while the Shanghai Composite shed 1.2% to 2,943.24.

    On Tuesday, the S&P 500
    SPX,
    -0.65%

    fell 0.7%, marking its fifth straight loss, closing at 3,588.84. The Nasdaq
    COMP,
    -1.10%

    dropped 1.1% to 10,426.19. The Dow Jones Industrial Average
    DJIA,
    +0.12%

    added 0.1% to 29,239.19, while the Russell 2000 index
    RUT,
    +0.06%

    rose 1 point, or about 0.1%, to 1,692.92.

    Recession fears have been weighing heavily on markets as stubbornly hot inflation burns businesses and consumers. Economic growth has been slowing as consumers temper spending and the Federal Reserve and other central banks raise interest rates.

    The International Monetary Fund on Tuesday cut its forecast for global economic growth in 2023 to 2.7%, down from the 2.9% it had estimated in July. The cut comes as Europe faces a particularly high risk of a recession with energy costs soaring amid Russia’s invasion of Ukraine.

    See: Global economy most vulnerable since COVID crisis, with housing market at potential ‘tipping point,’ IMF warns

    Wall Street is closely watching the Federal Reserve as it continues to aggressively raise its benchmark interest rate to make borrowing more expensive and slow economic growth. The goal is to cool inflation, but the strategy carries the risk of slowing the economy too much and pushing it into a recession.

    “The market desperately wants a reason for the Fed to be able to stop tightening and the data recently hasn’t given them that opening with respect to inflation,” said Willie Delwiche, investment strategist at All Star Charts.

    Computer-chip manufacturers continued slipping in the wake of the U.S. government’s decision to tighten export controls on semiconductors and chip manufacturing equipment to China. Qualcomm
    QCOM,
    -3.99%

    fell 4%.

    See: Intel reportedly plans to lay off thousands of workers, with details potentially emerging alongside quarterly earnings

    Uber
    UBER,
    -10.42%

    fell 10.4% and Lyft
    LYFT,
    -12.02%

    slumped 12% following a proposal by the U.S. government that could give contract workers at ride-hailing and other gig economy companies full status as employees.

    The Fed will release minutes from its last meeting on Wednesday, possibly giving Wall Street more insight into its views on inflation and next steps.

    Investors still expect the Fed to raise its overnight rate by three-quarters of a percentage point next month, the fourth such increase. That’s triple the usual amount, and would bring the rate up to a range of 3.75% to 4%. It started the year at virtually zero.

    Rex Nutting: Leading indicators show inflation is slowing, but Fed policy makers are too busy looking in rearview mirror to notice

    The government will also release its report on wholesale prices Wednesday, providing an update on how inflation is hitting businesses. The closely watched report on consumer prices will be released on Thursday, and a report on retail sales is due Friday.

    “Everyone is still hoping that every inflation report will be the one that shows that pressure is alleviating,” Delwiche said.

    Wall Street is also gearing up for the start of the latest corporate earnings reporting season, which could provide a clearer picture of inflation’s impact.

    Among the companies reporting quarterly results this week: PepsiCo
    PEP,
    +0.48%
    ,
    Delta Air Lines
    DAL,
    -1.97%

    and Domino’s Pizza
    DPZ,
    -1.99%
    .
    Banks including Citigroup
    C,
    -2.76%

    and JPMorgan Chase
    JPM,
    -2.89%

    will also report results.

    In energy trading, benchmark U.S. crude
    CL00,
    -0.75%

    lost 82 cents to $88.53 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude-oil prices fell 2% Tuesday. Brent crude
    BRN00,
    -0.56%
    ,
    the international pricing standard, fell 62 cents to $93.67 a barrel.

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