Asian shares fall, led by 5.1% drop in Tokyo after tech-driven pullback on Wall St

BANGKOK – Stocks fell on Friday in Asia, with Japan’s Nikkei 225 index falling 5.1%.

The declines followed a retreat on Wall Street after weak data on the US economy raised concerns that the Federal Reserve may have missed an opportunity to cut interest rates, which its chairman, Jerome Powell, did. , said it could happen in September, before undermining economic growth.

Tokyo’s Nikkei 225 lost more than 1,900 points to 36,199.31 and Hong Kong’s Hang Seng fell 2.1% to 16,950.59.

Stocks in other Asian markets also sank.

The Shanghai Composite index posted a more modest loss of 0.5% to 2,919.32.

The Kospi in Seoul fell 3.3% to 2,687.31 and Taiwan’s Taiex sank 3.8%. Both markets tend to be hit hard due to large companies in the technology sector.

South Korea’s Samsung Electronics fell 3.6%, while another maker of computer chips and other components, SK Hynix, fell 8.6%. Taiwan Semiconductor Manufacturing Co., the world’s largest chipmaker, lost 5.1%.

Elsewhere in Asia, the S of Australia&OP/ASX gave up 2.1% to 7,940.70 and the Sensex in India fell 1%. Bangkok SET fell 0.4%.

“Fed chief Powell’s short-lived satisfaction in communicating decent odds of a rate cut in September has soured as investors are now panicking that the central bank is not cutting soon,” said José Torres, senior economist at Interactive Brokers, in a commentary.

Japanese stocks were hurt after the central bank raised its reference interest rate on Wednesday. This pushed the value of the Japanese yen higher against the US dollar.

The dollar rose to 149.39 yen from 149.37 yen. It recently traded above 160 yen.

The euro rose to $1.0796 from $1.0789.

A stronger yen is likely to hurt the overseas profits of major manufacturers such as Toyota Motor, whose shares fell 2.7%. It could also have an impact on arrivals of foreign tourists who have flocked to the country to enjoy bargains thanks to the prolonged weakness of the Japanese currency.

On Thursday, S.&OP 500 fell 1.4% to 5,446.68 after a report showed US manufacturing activity is still shrinking. The Dow Jones Industrial Average fell 1.2% to 40,347.97 and the Nasdaq composite fell 2.3% to 17,194.15. Small stocks in the Russell 2000 index fell 3%.

Manufacturing has been one of the areas of the economy most affected by high interest rates, and the Institute for Supply Management report helped erase what had been gains for US stock indexes earlier in the morning. Other reports released Thursday showed that the number of U.S. workers applying for unemployment benefits reached its highest level in about a year and that U.S. worker productivity improved during the spring.

Together, the data will likely eliminate upward pressure on inflation and give the Federal Reserve more leeway to cut interest rates. A day earlier, yields fell after Fed Chairman Jerome Powell gave the clearest indication yet that inflation may have slowed enough for rate easing to begin in September.

Concern is growing that the Fed may have kept rates too high for too long in its zeal to suppress inflation. It kept its prime interest rate at a two-decade high for about a year, making it more expensive to borrow to buy a house, a car or anything with credit cards. It can take months to a year for the full effects of a rate cut to ripple through the economy.

Investors are united in their belief that the Federal Reserve will cut its key interest rate in September. The only question is how many times it can be cut this year and next.

Shares of companies whose profits are most closely tied to the strength of the economy have seen some of the steepest declines on Wall Street. Energy stocks in S&OP 500 fell 2.6%, for example, while industrial companies in the index weakened 1.8%.

The weak economic numbers raise risks for an already highly anticipated jobs report due out on Friday. Economists expect this to show a slight slowdown in U.S. hiring last month. But the numbers may be distorted by the effects of Hurricane Beryl, so headline numbers may appear worse than the underlying fundamentals suggest.

YOU&P500 would have fallen further on Thursday if not for Meta Platforms. The company behind Facebook and Instagram rose 4.8% after reporting earnings and revenue last quarter that surpassed analysts’ expectations.

Other technology companies have received a less welcoming reception from investors. ARM Holdings reported better profits and revenue last quarter than expected, for example. Even so, its US-listed shares fell 15.7%.

Benchmark U.S. crude oil gained 54 cents to $76.85 per barrel. Brent crude, the international standard, rose 53 cents to $80.50 per barrel.

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AP Business Writer Stan Choe contributed.