Asian shares mostly fall as rate hikes, China slowdown loom

Oil prices were higher and U.S. futures fell following sharp declines on Wall Street last week.

Benchmarks declined across the region. Jakarta’s benchmark fell 4%.

China reported its exports rose 3.7% over a year earlier in April to $273.6 billion, down sharply from March’s 15.7% growth, as global demand weakened. That added to pressure on the world’s second-largest economy after Shanghai and other industrial cities were shut down to fight virus outbreaks.

Imports crept up 0.7% in April to $222.5 billion, in line with the previous month’s sub-1% growth.

Companies and investors worry the ruling Communist Party’s “zero-COVID” strategy that temporarily closed most businesses in Shanghai and other industrial centers is disrupting global trade and activity in autos, electronics and other industries.

But a slowing global economy is also taking a toll.

“The blame rests partly with China’s COVID-19 outbreak, which has led to manpower shortages and bottlenecks in the logistics sector. But the extent of these disruptions shouldn’t be overplayed,” Julian Evans-Pritchard said in a commentary. “Instead, the drop in exports seems to mostly reflect softer demand.”

The Shanghai Composite was little changed, falling nearly 0.1% to 2,999.77. Markets were closed in Hong Kong for a national holiday.

Japan’s benchmark Nikkei 225 lost 2.5% to finish at 26,319.34. South Korea’s Kospi dipped 1.3% to 2,611.28. Australia’s S&P/ASX 200 dropped 1.2% to 7,120.60. The benchmark in Jakarta, Indonesia, lost 4.4% as markets reopened after the Eid al-Fitr holiday last week.

Investors are watching for the outcome of the presidential election in the Philippines, although it remains unclear how economic policies might change. The son of long-ago overthrown Philippine dictator Ferdinand Marcos is the top contender in Monday’s vote, based on most voter-preference surveys.

Apart from concerns about inflation and coronavirus restrictions, the war in Ukraine is still a major cause for uncertainty. More than 60 people were feared dead after a Russian bomb flattened a school being used as a shelter, Ukrainian officials said. Moscow’s forces pressed their attack on defenders inside Mariupol’s steel plant in an apparent race to capture the city ahead of Russia’s Victory Day holiday Monday.

“Russia’s Victory Day today will also bring geopolitical risks back into the limelight as well. President Putin is likely to reiterate his justification for the Ukraine war but markets may be watching for any further efforts to ramp-up military operations to secure the war,” said Yeap Jun Rong, market strategist at IG in Singapore.

Shares closed lower on Wall Street on Friday with the market’s fifth straight weekly decline. Worries are simmering the that despite strong U.S. employment trends, the Federal Reserve’s efforts to tame inflation by raising interest rates may send the American economy into a recession.

The increase Wednesday in the Fed’s key short-term rate raised it by 0.5 percentage points to a range of 0.75% to 1%, the highest level since the pandemic struck two years ago.

The S&P 500 fell 0.6% to 4,123.34. The Dow dropped 0.3% to 32,899.37. The Nasdaq gave up 1.4% to 12,144.66. Smaller companies fell more than the broader market. The Russel 2000 slid 1.7% to 1,839.56.

The Fed is hoping to raise rates and slow the economy enough to snuff out the highest inflation in four decades, but it risks choking off growth if it goes too far or too quickly. Fed chair Jerome Powell has reassured investors by saying the central bank was not “actively considering” an even bigger jump of 0.75 percentage points at its next meeting.

In energy trading, benchmark U.S. crude fell 36 cents to $109.41 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the basis for pricing oil for international trading, edged down 12 cents to $112.27 a barrel.

In currency trading, the U.S. dollar rose to 131.13 Japanese yen from 130.55 yen. The euro cost $1.0509, down from $1.0545.

AP Business Writer Joe McDonald in Beijing contributed.