Asian shares were mostly lower on Monday after Wall Street closed out a miserable September with a loss of 9.3%, the worst monthly decline since March 2020.
Tokyo rose while other regional markets declined. Shanghai was closed for China’s weeklong National Day holidays.
Japan's Nikkei 225 index gained 0.6% to 26,100.68 after a Bank of Japan quarterly survey showed sentiment among manufacturers has darkened, reflecting rising costs, the weakening yen and lingering pandemic-related restrictions.
The headline measure for the “tankan,” measuring sentiment among large manufacturers, was plus 8, down from plus 9 the previous quarter. The tankan measures corporate sentiment by subtracting the number of companies saying business conditions are negative from those responding they are positive.
“Today’s Tankan survey suggests that while the services sector is benefitting from the subsiding virus wave, the outlook for the manufacturing sector continues to worsen," said a report from Capital Economics. It noted it was the third consecutive decline in sentiment for the world's third largest economy.
The BOJ has kept interest rates below zero in a longstanding effort to encourage inflation and keep deflation at bay as the country ages and its population shrinks. That has kept the value of the yen weak relative to the U.S. dollar, which has been strengthening as the Federal Reserve raises rates to combat decades-high inflation.
The dollar was trading at 144.92 yen early Monday, up from 144.68 yen late Friday. The euro was at 97.91 cents, down from 97.96 cents.
Elsewhere in Asia, Hong Kong's Hang Seng index fell 1.3% to 16,995.98 and the Kospi in Seoul declined 0.4% to 3,118.11. Australia's S&P/ASX 200 edged 0.1% lower to 6,466.70. Taiwan's Taiex lost 0.7% and Bangkok's SET declined 1%.
Wall Street closed out a miserable September on Friday with the S&P 500's worst monthly skid since the coronavirus pandemic crashed global markets. It’s now at its lowest level since November 2020 and is down by more than a quarter since the start of the year.
The Fed has been at the forefront of the global campaign to slow economic growth and hurt job markets just enough to undercut inflation but not so much that it causes a recession. On Friday, the Fed’s preferred measure of inflation showed it was worse last month than economists expected. That should keep the Fed on track to keep hiking rates and hold them at high levels a while, raising the risk of it going too far and causing a downturn.
Vice Chair Lael Brainard was the latest Fed official on Friday to insist it won't pull back on rates prematurely.
All told, the S&P 500 fell 1.5% to close at 3,585.62 Friday. The Dow Jones Industrial Average dropped 1.7% to 28,725.51. The Nasdaq composite slid 1.5% to 10,575.62. The tech-heavy index sank 10.5% in September and is down 32.4% so far this year.
Smaller company stocks also had a rough September. The Russell 2000 ended the month down 9.7%. On Friday, it lost 0.6% to 1,664.72.
A report on Friday offered a glimmer of hope, as a measure of consumer sentiment showed U.S. expectations for future inflation fell in September. That's crucial for the Fed because tightly held expectations for higher inflation can create a debilitating, self-reinforcing cycle that worsens it.
Other worries hang over global markets, including Russia's invasion of Ukraine. A U.K. government plan to cut taxes sent bond markets spinning recently on fears it could make inflation even worse. Bond markets calmed a bit only after the Bank of England pledged last week to buy however many U.K. government bonds are needed to bring yields back down.
The stunning and swift rise of the U.S. dollar against other currencies, meanwhile, raises the risk of creating so much stress that something cracks somewhere in global markets.
In other trading Monday, U.S. benchmark crude oil gained $2.15 to $81.64 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.74 to $79.49 per barrel on Friday.
Brent crude oil, the standard for pricing international oil, rose $2.21 to $87.35 per barrel.
The specter of a possible global recession has led major oil producing nations to reportedly consider further output cuts t hat would limit supplies and push prices higher.
OPEC and allied oil-producing countries, including Russia, made a small trim in their supplies to the global economy a month ago, underlining their unhappiness as recession fears help drive down crude prices.
