Japan stocks rise after election, rest of region declines

By YURI KAGEYAMA
AP Business Writer

TOKYO (AP) — Asian stocks were mostly down on Monday, though Japan’s benchmark index rallied, welcoming a landslide legislative election victory for the ruling Liberal Democratic Party.

Concerns about global inflation and disruptions to economic activity caused by the coronavirus pandemic are negatively affecting investor sentiment.

The tide could change as more market participants focus on the economic outlook, Stephen Innes of SPI Asset Management said in a commentary.

“A recession is not the market’s baseline outlook, but until proven otherwise, investors will be debating the extent of growth affected, not the likelihood of a recession; so good economic data is good news for equities,” he said.

Japan’s benchmark Nikkei jumped 1.1% in morning trade to 26,803.30.

Japan’s ruling party and its coalition partner scored a major victory in Sunday’s poll, two days after former Prime Minister Shinzo Abe was assassinated. Abe was shot by a man coming out of the crowd listening to his campaign speech, pulled out a homemade gun and fired.

The attack shocked a nation that rarely sees gun violence. The Liberal Democratic Party was tied to victory even before the assassination, but some analysts said the shock of Abe’s death was likely to reinforce that trend.

Along with its partner the Komeito party, the ruling coalition raised its combined share in the 248-seat upper house to 146. the policies of the late Abe and the Liberal Democrats will remain unchanged.

Australia’s S&P/ASX 200 fell 0.6% to 6,638.20. The South Korean Kospi fell 0.3% to 2,342.82.

Hong Kong’s Hang Seng fell 2.7% to 21,144.53, while the Shanghai Composite fell 1.5% to 3,307.23. Tech stocks tumbled after market regulators in China fined companies for failing to report past trades as required.

Wall Street had a late weekend as global markets turned their attention to Chinese economic indicators and actions by central banks, including the US Federal Reserve, to rein in stubbornly rising inflation.

The hotter the US economy remains, the more likely the Federal Reserve is to keep raising interest rates.

A strong hiring report for June eased fears that the US economy was on the cusp of a recession – and highlighted the resilience of the country’s labor market.

Yet the figures the government released on Friday also highlighted the stark divide between a healthy labor market and the rest of the economy: inflation has hit 40-year highs, consumers are increasingly sluggish, home sales and manufacturing are weakening and the economy may actually have shrunk over the past six months.

The Fed has already raised its overnight rate three times this year, and the increases have become increasingly aggressive. Last month it raised rates to their highest since 1994, by three-quarters of a percentage point to a range of 1.50% to 1.75%. It was practically nil as recently as March.

Other central banks around the world are also raising interest rates and scrapping contingency plans put in place at the start of the pandemic to support financial markets.

On Friday, the S&P 500 fell 0.1% to 3,899.38, ending a four-day winning streak. The Dow Jones fell 0.1% to 31,388.15, while the Nasdaq rose 0.1% to 11,635.31. The Russell 2000 index of small company stocks slid less than 0.1% to 1,769.36.

In energy trading, benchmark U.S. crude fell 79 cents to $104.00 a barrel. It gained $2.06 to $104.79 a barrel on Friday.

Brent, the international standard, fell 74 cents to $106.28 a barrel.

In currency trading, the US dollar gained 137.03 Japanese yen from 136.10 yen. The euro traded at $1.0148, down from $1.0182.

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