Asian stocks frightened by fear of US inflation and hopes of Fed calm
Asian stocks slumped to seven-week lows on Thursday after a dismaying rise in US inflation pummeled Wall Street and pushed bond yields up amid concerns the Federal Reserve may have to act early on tightening .
“Higher inflation is a definite drawback for stocks given the likely reaction of rates,” said Alan Ruskin, macroeconomic strategist at Deutsche Bank.
“The more nominal GDP gains are dominated by higher inflation, particularly wage inflation, the greater the possible pressure on profit margins. This plays into a more jerky and less bullish equity bias.”
The largest MSCI index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 0.6%, although trade was weakened by the holidays in a number of countries.
The Japanese Nikkei (.N225) fell 1.8% and hit its lowest since early January, while the Chinese blue chips (.CSI300) lost 0.7%.
Asian markets were already on their backs this week amid fears of inflation and a sell-off of technology on Wall Street, and nerves were further rocked on Wednesday when Taiwanese stocks (.TWII) fell amid fears the l The island faces a partial lockdown amid an outbreak of the virus. Read more
Nasdaq futures were trying to rally with a gain of 0.5%, while S&P 500 futures added 0.4%. But EUROSTOXX 50 futures still caught overnight declines and lost 0.5%, while FTSE futures lost 0.3%.
Wall Street was blind when data showed US consumer prices rose the most in nearly 12 years in April, as demand boomed amid an economic reopening meeting supply constraints. at home and abroad. Read more
The rise was largely due to disproportionate increases in air fares, used cars and accommodation costs, all of which were due to the pandemic and likely transient.
Fed officials were quick to downplay the impact of the one-month figures, with Vice President Richard Clarida saying stimulus measures would still be needed for “some time.”
“It would probably take a very strong employment report in May, with significant upward revisions through March and especially April, for the Fed to start a discussion on the cut at its June meeting,” he said. said JPMorgan economist Michael S. Hanson.
“We continue to expect the Fed to start reducing its pace of asset purchases early next year.”
Investors have responded by predicting an 80% chance of a Fed rate hike as early as December of next year.
Yields on 10-year Treasuries stabilized at 1.68%, after climbing 7 basis points overnight in the biggest daily rise in two months. The yield curve also steepened sharply.
It was a boost for the dollar, which had sagged under the weight of the rapidly expanding US budget and trade deficits. The euro fell to $ 1.2082, leaving behind a 10-week peak at $ 1.2180.
The dollar settled at 109.60 yen, after hitting a five-week high of 109.78 and well below this week’s low of 108.34. The dollar index hovered at 90.672, from a 10-week low at 89.979.
In the cryptocurrency space, Bitcoin stabilized after slipping more than 10% when Elon Musk tweeted that Tesla Inc (TSLA.O) had suspended the use of Bitcoin to purchase its vehicles. Read more
Rising yields and the dollar put pressure on gold, which remained at $ 1,819 an ounce and off a multiple high around $ 1,845.
Oil prices moved away from their two-month highs, hit after falling U.S. crude exports and the International Energy Agency (IEA) said demand was already outstripping supply.
Brent lost 46 cents to $ 68.86 a barrel, while US crude lost 47 cents to $ 65.61.
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