European shares rise, Asian stocks fall on US bank worries, China woes

Tokyo: European benchmarks rose Friday after Asian shares mostly declined on looming worries over US banks and lagging demand from China, the region's major driver of growth.

France's CAC 40 rose 1.0 per cent in early trading to 7,451.96. Germany's DAX added 0.6 per cent to 15,931.25. Britain's FTSE 100 gained 0.5 per cent to 7,767.52. US shares were set to drift higher with Dow futures up 0.4 per cent to 33,507.00. S&P 500 futures added 0.4 per cent to 4,160.50.

Oil prices fell while currencies traded in a narrow range.

“Asian equities struggled for direction after weak inflation data in China pointed to weakening demand,” said Stephen Innes, managing partner at SPI Asset Management. Recent data reflect very low inflation and weak credit extensions in China, which all indicate slowing growth following an initial jump after the nation dropped pandemic-related restrictions, he said.

Japan's benchmark Nikkei 225 gained 0.9 per cent to finish at 29,388.30 as companies like Nissan Motor Co. gained after reporting relatively favourable earnings. But SoftBank Group Corp. slumped after reporting its second year in a row of losses. Australia's S&P/ASX 200 edged up nearly 0.1 per cent to 7,256.70. South Korea's Kospi dropped 0.6 per cent to 2,475.42. Hong Kong's Hang Seng slipped 0.6 per cent to 19,627.24, while the Shanghai Composite dove 1.1 per cent to 3,272.36.

Investors have been hunting for the next possible victim in the US banking industry after high interest rates helped lead to three failures since March. Helping to limit the losses for the overall market was a report showing US inflation at the wholesale level was a bit cooler last month than economists expected. It followed a report from the prior day that showed inflation at the consumer level was also behaving largely as forecast. The reports helped reaffirm expectations on Wall Street that the Federal Reserve will hold off on hiking interest rates again at its next meeting in June. That would be the first time that's happened in more than a year.

A separate US report said more workers filed for unemployment benefits last week than expected. That adds to concerns about a potential recession because the job market has been one of the main pillars propping up the economy. But a cooling labour market would also carry a benefit for the Fed, which fears that a too-hot job market could put upward pressure on inflation.

Traders are betting on a high probability that the Fed will have to cut interest rates later this year. Rate cuts act like steroids for financial markets but would likely happen only if the economy slides into recession and needs such oomph. In energy trading, benchmark US crude lost 46 cents to $70.41 a barrel. Brent crude, the international standard, shed 56 cents to $74.42 a barrel. In currency trading, the US dollar rose to 134.77 Japanese yen from 134.52 yen. The euro cost $1.0904, inching down from $1.0921.