Asian shares sink on revived worries over recession, China

A U.S. measure of inflation that’s closely watched by the Federal Reserve eased in October, raising questions over the central bank’s determination to keep raising interest rates to tame price increases.

And activity in American manufacturing contracted in November for the first time since May 2020, according to the Institute for Supply Management. The report also showed that prices are falling.

Slower growth due to tighter monetary policies has slowed new orders and order backlogs, “which saw manufacturing conditions contracting for the first time since June 2020,” Jun Rong Yeap of IG said in a report. That may suggest that with “inflation risks behind us now, ‘bad news’ in economic data may not be ‘good news’ for markets as recession fears could be brewing,” he said.

Signs of weakening trade, especially for export dependent economies in Asia, have deepened worries over slowing growth in China and its implications for the global economy.

Tokyo’s Nikkei 225 index lost 1.7% to 27,750.22 and the Hang Seng in Hong Kong declined 0.7% to 18,612.49. The Kospi in Seoul shed 1.4% to 2,445.86.

The Shanghai Composite index gave up 0.3% to 3,154.74 and Australia’s S&P/ASX 200 slipped 0.7% to 7,305.70.

Bangkok’s SET index lost 0.4% and the Sensex in Mumbai was down 0.6%.

That followed a 0.1% decline in the benchmark S&P 500, which closed at 4,076.57 on Thursday. The Dow Jones Industrial Average fell 0.6% to 34,395.01, while the Nasdaq edged 0.1% higher to 11,482.45.

The Russell 2000 index of small companies also took a step back, falling 0.3% to close at 1,881.68.

Action was muted as traders awaited a closely watched monthly report on jobs due out Friday that will show how the labor market is holding up, which may influence what the Fed does next in its bid to cool inflation.

Banks and household goods providers were among the biggest drags on the benchmark S&P 500. Bank of America fell 2.9% and Costco slid 6.6%.

Gains in health care companies, communications services stocks and elsewhere in the market helped keep the losses in check. Drugmaker Pfizer rose 1.9% and Netflix climbed 3.7%.

Salesforce slumped 8.3% for the biggest drop in the S&P 500 after Bret Taylor said he would resign as co-CEO of the customer-management software developer.

Markets rallied Wednesday after Fed Chair Jerome Powell the central bank could begin moderating its pace of rate hikes at its next meeting in mid-December. The Fed, though, has been very clear about its intent to continue raising interest rates until it is sure that inflation is cooling.

The Fed has raised its benchmark rate six times since March, driving it to a range of 3.75% to 4%, the highest in 15 years. Wall Street expects the benchmark rate to reach a peak range of 5% to 5.25% by the middle of 2023.

A big concern for Wall Street has been whether the Fed can tame rates without sending the economy into a recession as it hits the brakes on growth. Businesses are seeing demand fall for a wide range of goods as inflation squeezes wallets. Analysts generally expect the U.S. to dip into a recession, even if it is mild and short, at some point in 2023.

In other trading Friday, U.S. benchmark crude oil lost 6 cents to $81.16 per barrel in electronic trading on the New York Mercantile Exchange. It gained 67 cents to $81.22 per barrel on Thursday.

Brent crude oil, the standard for pricing oil for international trading, added 12 cents to $87.00 a barrel.

The U.S. dollar slipped to 135.10 Japanese yen from 135.31 yen late Thursday. The euro was unchanged at $1.0522.

AP Business Writers Damian J. Troise and Alex Veiga contributed.