TOKYO — Asian stocks fell largely on Friday after a U.S. Federal Reserve official said the central bank may not make some of the interest rate cuts Wall Street has been expecting this year, citing inflation concerns.
Japan’s benchmark Nikkei 225 fell 2.0% to end at 38,992.08. Sydney’s S&The P/ASX 200 fell 0.6% to 7,773.30. South Korea’s Kospi fell almost 1.0% to 2,715.35. Hong Kong’s Hang Seng was little changed at 16,729.98.
Tensions in the Middle East increased the feeling of pessimism. But some analysts suggested the Fed could cut rates at least once later this year.
“There are already clear signs of a slowdown in economic activity and conditions for continued wage pressures,” said Tan Jing Yi of Mizuho Bank in Singapore.
On Wall Street, the S&The P500 fell 1.2% on Thursday, marking its worst day in seven weeks. Earlier in the day, the price had reached last week’s record with a gain of almost 1%.
The Dow Jones Industrial Average fell 530 points, or 1.4%, after reversing a nearly 300-point gain. The Nasdaq index fell 1.4%.
Financial markets were already tense as traders made their final moves ahead of a US jobs report on Friday, which could also shake the market.
A late rise in oil prices amid ongoing tensions in the Middle East sparked unrest and threatened to further increase pressure on inflation after oil’s strong gains so far this year.
Around the same time, Treasury yields fell in the bond market, which could signal that investors are looking for safer havens, and fear increased among U.S. stock investors.
Traders had already dramatically scaled back their forecasts for the number of rate cuts the Federal Reserve would make this year, from six at the start of the year to three more recently. This put them in line with Fed officials in general.
But several recent updates on the economy have turned out better than expected, apart from some disappointingly high inflation reports early in the year that could be seen as temporary blips. A report earlier this week showing a surprise return to growth for U.S. manufacturing was particularly concerning.
Wall Street wants the labor market to cool enough to remove upward pressure on inflation, but not so much that too many people become unemployed and trigger a recession.
That has raised expectations for a report next Friday in which the U.S. government will show how many workers were hired across the country last month. Economists expect the economy to slow down in March from February.
All in all, the S&P500 fell 64.28 points to 5,147.21. The Dow Jones Industrial Average fell 530.16 to 38,596.98, and the Nasdaq composite fell 228.38 to 16,049.08.
In the oil market, a barrel of US benchmark oil rose 34 cents to $86.93 per barrel. It rose $1.16 to reach $86.59 on Thursday. Brent crude, the international standard, rose 48 cents to $91.13.
In currency trading, the US dollar fell from 151.30 yen to 151.23 Japanese yen. The euro cost $1.0832, up from $1.0841.
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AP Business Writer Stan Choe contributed to this report.
