TOKYO (AP) — Asian shares were mixed Friday as Chinese stocks sank after leaders acknowledged that the official growth target of 5.5 percent for this year would not be met.
Investors appear to be more convinced that the Federal Reserve may moderate its aggressive rate hikes aimed at controlling inflation after the Commerce Department reported that the US economy contracted at an annual pace of 0.9% during the last quarter. This followed a 1.6% year-on-year drop in the first quarter.
Investors were also cautiously eyeing regional tensions over China’s stance on Taiwan after President Joe Biden and Xi Jinping spoke for more than two hours on Thursday. China left no doubt that it blames the United States for a deteriorating relationship, but the White House said the goal of the call was to “responsibly manage our differences and work together where our interests align “.
Hong Kong’s Hang Seng fell 2.4 percent to 20,123.55 and the Shanghai Composite dropped 1 percent to 3,250.64 after China’s leaders acknowledged the economy in difficulties will not reach its official growth target of 5.5% this year.
The announcement after a planning meeting of the ruling Communist Party said on Thursday that Beijing will try to shore up consumer demand but will follow strict anti-Covid-19 tactics that have disrupted manufacturing and trade. It underscores the high cost Xi’s government is willing to incur to stop the virus in a politically sensitive year in which he is widely expected to try to extend his term in power.
Japan’s benchmark Nikkei 225 lost 0.2% to 27,801.64, while Australia’s S&P/ASX 200 gained 1.0% to 6,945.20. South Korea’s Kospi rose 0.7% to 2,451.50.
Japanese government data showed factory output in June rose 8.9% from the previous month, marking the first increase in three months. The recent relaxation of pandemic lockdowns in China has helped boost Japanese output.
“On the economic data front, China’s easing of restrictions also led to stronger-than-expected June output for Japan, with China’s reopening potentially having a positive impact across the region and during the second half of the year,” Yeap said. Jun Rong, IG Market Strategist in Singapore.
A spike in COVID-19 infections to record levels in many parts of Japan has raised concerns. But Robert Carnell, ING’s regional head of Asia-Pacific research, believes second-quarter GDP, or gross domestic product, will rebound marginally from the first-quarter contraction.
On Thursday, the S&P 500 rose 1.2% to 4,072.43, while the Dow gained 1% to close at 32,529.63. The Nasdaq gained 1.1% to 12,162.59. The Russell 2000 rose 1.3% to 1,873.03.
Consecutive quarters of falling GDP are an informal, though not definitive, indicator of what economists call a technical recession.
The GDP report indicated weakness across the economy. Consumer spending slowed as Americans bought fewer goods. Business investment fell. Inventories fell as companies slowed their restocking, shedding 2 percentage points of GDP.
The Federal Reserve has made slowing the US economy to control the highest inflation in the last 40 years its goal by raising interest rates, last Wednesday. The latest GDP report, along with other recent weak economic data, could give some investors confidence that the central bank will be able to ease the size of any additional rate hikes.
The central bank on Wednesday raised its key short-term interest rate by 0.75 percentage points, lifting it to the highest level since 2018. The move sparked a broad market rally led by technology stocks that help give the Nasdaq its biggest gain in more than two years. . The major indexes are now on pace for a weekly gain, extending Wall Street’s strong July rally.
In a busy week of corporate earnings reports, investors have focused on what companies are saying about inflation and the impact that rising interest rates are having on their businesses and customers.
Shares of Spirit Airlines rose 5.6% after JetBlue said it agreed to buy the budget airline for $3.8 billion to create the nation’s fifth-largest airline. A day earlier, Spirit’s attempt to merge with Frontier Airlines collapsed. Frontier Airlines jumped 20.5%.
In energy trading, benchmark U.S. crude gained 40 cents to $96.82 a barrel in electronic trading on the New York Mercantile Exchange. It lost 84 cents to $96.42 on Thursday.
Brent crude, the international price standard, gained 36 cents to $102.19 a barrel.
In currency trading, the US dollar fell to 132.67 Japanese yen from 134.27 yen late on Thursday. The euro was at $1.0247, up from $1.0199.
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AP Business Writer Alex Veiga contributed.
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Yuri Kageyama is on Twitter
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