Tokyo, Jul 12 (AP) Asian shares fell on Tuesday after a slump on Wall Street erased recent gains. US futures and oil prices also declined.

Investors are on the lookout this week for updates on inflation and corporate profits, while renewed coronavirus outbreaks are adding to jitters.

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The euro cost USD 1.0025, down from USD 1.0042, having dipped as low as USD 1.0007. The US dollar inched down to 137.13 Japanese yen from 137.47 yen.

Both currencies have been trading at 20-year lows as the dollar has surged along with US interest rates, which promise higher returns for investors.

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The European common currency is close to dropping below parity, or one-to-one with the dollar. The last time the euro was below USD 1 was on July 15, 2002.

In share trading, Japan's benchmark Nikkei dropped 1.8 per cent in morning trading to 26,340.48.

Australia's S and P/ASX 200 gained 0.3 per cent to 6,621.00. South Korea's Kospi slipped 1.2 per cent to 2,311.56.

Hong Kong's Hang Seng sank 1.5 per cent to 20,820.59, while the Shanghai Composite index shed 1 per cent to 3,281.25 on growing concerns over COVID-19.

Adding to the pessimism, Hong Kong authorities announced they are considering implementing an electronic health code system to restrict movements of people infected with COVID-19, as well as overseas arrivals, a system similar to what's already in place in mainland China.

The highest inflation in four decades is pushing the Federal Reserve and other central banks to hike interest rates, which puts the clamps on the economy and hurts various types of investments.

On Wall Street, the S and P 500 dropped 1.2 per cent to 3,854.43, giving up most gains from the previous week. The Dow Industrial Average dipped 0.5 per cent to 31,173.84, while the Nasdaq composite fell 2.3 per cent to 11,372.60.

Stocks of smaller companies were some of the biggest losers, with the Russell 2000 index down 2.1 per cent, as worries about a possible recession continued to dog markets.

An outbreak of COVID infections is forcing casinos in the Asian gambling centre of Macao, near Hong Kong, to shut for at least a week. That sent Wynn Resorts and Las Vegas Sands down more than 6 per cent apiece for some of the larger losses in the S and P 500.

Twitter lost even more, 11.3 per cent, in the first trading after billionaire Elon Musk said he wants out of his deal to buy the social media platform for USD 44 billion. Twitter said it will take Musk to court to uphold the agreement.

Other big technology companies were also particularly weak.

In the bond market, a warning signal continued to flash about a possible recession. The yield on the 10-year Treasury slid to 2.98 per cent from 3.09 per cent late on Friday as investors moved dollars into investments seen as holding up better in a downturn. It remains below the two-year Treasury yield, which fell to 3.07 per cent.

Some investors see that as a sign that a recession may hit in the next year or two.

Other warning signals in the bond market that some see as more reliable, which focus on shorter-term yields, still aren't flashing. But they also are showing less optimism.

Companies this week are set to begin reporting how their profits fared during the spring. Big banks and other financial companies dominate the early part of the schedule, with JPMorgan Chase and Morgan Stanley set for Thursday.

BlackRock, Citigroup and Wells Fargo are among those reporting on Friday.

Expectations for second-quarter results seem to be low. Analysts are forecasting 4.3 per cent growth for companies across the S and P 500, which would be the weakest since the end of 2020, according to FactSet.

Even if companies end up reporting better results than expected, which is usually the case, analysts say the heavier focus will be on what CEOs say about their profit trends for later in the year.

The roughly 19 per cent drop for the S and P 500 this year has been due entirely to rising interest rates and changes in how much investors are willing to pay for each USD 1 of a company's profit.

So far, expectations for corporate profits have not come down much. If they do, that pull stocks still lower.

The recent rise of the US dollar against other currencies has added another challenge to companies already contending with high inflation and potentially weakening demand, according to Michael Wilson, equity strategist at Morgan Stanley.

One euro is worth close to USD 1 now, down 15 per cent from a year earlier, for example. The Japanese yen is also at a 20-year low. That means sales made in euros or yen are worth fewer dollars than before.

“The main point for equity investors is that this dollar strength is just another reason to think earnings revisions are coming down over the next few earnings seasons,” Wilson wrote in a report.

Beyond earnings updates, reports this week on inflation will likely dominate trading. On Wednesday, economists expect a report to show that inflation at the consumer level accelerated again last month, up to 8.8 per cent from 8.6 per cent in May.

In energy trading, benchmark US crude fell USD 1.60 to USD 102.49 a barrel. It lost 70 cents to USD 104.09 a barrel on Monday.

Brent crude, the international standard for pricing, lost USD 1.56 to USD 105.54 a barrel. (AP)

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)