Stock market today: Asian shares mixed after Fed chair inflation comments

TOKYO (AP) — Asian shares were trading mixed Thursday following a retreat on Wall Street after the Federal Reserve chair made comments that indicated inflation still isn't under control.

Japan's benchmark Nikkei 225 fell 0.9% to finish at 33,264.88. Australia's S&P/ASX 200 declined 1.6% to 7,195.50. South Korea's Kospi gained 0.4% to 2,593.70. Trading was closed in Hong Kong and Shanghai for Dragon Boat Festival, a national holiday.

Shares fell in India.

The Chinese markets being closed provided a break from jitters about possible renewed tensions in the U.S.-China relationship after President Joe Biden referred to Chinese President Xi Jinping as a dictator. That pushed “back against the idea that the U.S.-China relationship could be warming with Secretary of State Antony Blinken’s visit,” said Yeap Jun Rong, market analyst at IG.

During Blinken's Beijing visit earlier this week, both sides agreed to stabilize badly deteriorated ties. But Blinken said China was not ready to resume military-to-military contacts.

Fitch Ratings said in its June Global Economic Outlook that the global growth outlook for next year has deteriorated, given the prospects of higher interest rates around the world.

“Global growth is showing near-term resilience but with core inflation remaining stubbornly high, central banks will have to continue tightening policy in the coming months," it said.

On Wall Street, declines in technology stocks left benchmarks mixed and sapped more momentum from a five-week rally. The S&P 500 fell 0.5% to 4,365.69. It was a third-straight pullback for the index after it rallied last week to its highest level in more than a year.

Weakness for high-growth stocks hit the Nasdaq composite in particular, and it lost 1.2% to 13,502.20. Still, roughly as many stocks rose as fell on Wall Street, and the Dow Jones Industrial Average dropped by a milder 0.3%, to 33,951.52.

Wall Street had been on a tear this year, with the S&P 500 up nearly 14% amid hopes that inflation is coming down quickly enough for the Federal Reserve to stop hiking interest rates soon. That would take pressure off the economy and could allow it to avoid a recession. Some analysts say the rally ran too far, too fast while inflation has remained stubbornly high, which could force the Fed to keep rates higher for longer.

Fed Chair Jerome Powell said Wednesday that "the process of getting inflation back down to 2% has a long way to go.” He said again that a couple more rate increases may be on the way, though the speed of the hikes is likely to slow after moving at a furious speed since early 2022.

“Given how far we’ve come, it may make sense to move rates higher but to do so at a more moderate pace,” he said in testimony before a House of Representatives committee. He likened it to slowing from 75 miles per hour on a highway to 50 and then even slower as the destination nears.

High rates have already helped cause three high-profile failures in the U.S. banking system. The banking industry remains under pressure, even after the federal government acted quickly to provide support.

Smaller and regional banks account for about 50% of U.S. commercial and industrial lending, according to Ann Miletti, head of active equity at Allspring Global Investments. And pressure on these banks would make it tougher for smaller and midsized businesses to get loans, which would hurt the economy.

Miletti said she’s leaning toward the probability of a coming U.S. recession because of how much the Fed has already raised rates in such a short time. She said the recession may not be very deep, but it could still last longer than many predict.

“Inflation is retreating,” she said, “but it won’t be a smooth decline.”

In energy trading Thursday, benchmark U.S. crude fell 18 cents to $72.35 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost 21 cent to $76.91 a barrel.

In currency trading, the U.S. dollar edged up to 141.86 Japanese yen from 141.81 yen. The euro cost $1.0983, little changed from $1.0990.

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AP Business Writer Stan Choe contributed from New York.

Yuri Kageyama is on Twitter https://twitter.com/yurikageyama