Asian shares rise in subdued holiday trading, as US futures jump

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TOKYO (AP) — Asian shares advanced Thursday, with many markets in the region closed for Labor Day holidays, after U.S. stocks stormed back from steep early losses to a seventh straight day of gains.

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Uncertainty about what President Donald Trump’s trade war will do to the U.S. economy remains a key focus for investors.

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Japan’s benchmark Nikkei 225 rose 0.9% to 36,359.24 after the Bank of Japan decided to keep its benchmark interest rate unchanged as worries continue to grow about the impact of Trump’s policies.

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Australia’s S&P/ASX 200 edged up less than 0.1% to 8,137.40.

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On Wednesday, the S&P 500 rose 0.1% to extend its winning streak to a seventh day, closing at 5,569.06. The Dow Jones Industrial Average added 0.3% to 40,669.36. The Nasdaq composite edged down by 0.1% to 17,446.34.

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It was a stunning reversal after the S&P 500 dropped as much as 2.3% and the Dow fell 780 points in early trading. Stocks initially tumbled after a report suggested the U.S. economy may have shrunk at the start of the year, falling well short of economists’ expectations, in a sharp turnaround from the economy’s solid growth at the end of last year.

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Importers rushed to bring products into the country before tariffs could raise their prices, which helped drag on the country’s overall gross domestic product.

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Such data raised the threat of a worst-case scenario called “stagflation,” one where the economy stagnates yet inflation remains high. Economists fear it because the Federal Reserve has no good tools to fix both problems at the same time. If the Fed were to try to help one problem by adjusting interest rates, it would likely make the other worse.

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Some better news came later in the day when a report said the measure of inflation that the Fed likes to use slowed in March. Inflation decelerated to 2.3%, closer to the Fed’s goal of 2%, from February’s reading of 2.7%. Stocks began paring their losses almost immediately after the report.

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If inflation keeps trending lower, it would give the Fed more leeway to cut interest rates in order to juice the economy.

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Much of Wednesday’s economic data raised concerns about a weakening economy. A report on the job market from ADP suggested employers outside the government may have hired far fewer workers in April than economists expected, less than half.

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It’s discouraging because a relatively solid job market has been one of the linchpins keeping the U.S. economy stable. A more comprehensive report on the job market from the U.S. government will arrive on Friday.