Asian stocks fell Thursday after elevated US inflation bolstered the case for aggressive monetary tightening and sparked a slide on Wall Street.
An Asian share gauge declined amid drops in Hong Kong and Japan and mixed performance in China. US futures stabilized after the S&P 500 hit the lowest since March 2021 and the tech-heavy Nasdaq 100 shed about 3%.
The Treasury curve has flattened on concerns that Federal Reserve monetary tightening will trigger an economic slowdown. The 10-year US yield slipped to 2.90%, the dollar dipped and oil held a rally on plunging US fuel inventories.
Hong Kong intervened after the city’s currency fell to the weak end of its trading band. Digital tokens stabilized from a Wednesday plunge, victims of ebbing liquidity and evaporating demand for speculative assets. Bitcoin is down over 13% this week.
US inflation moderated but topped expectations at 8.3%, signaling persistent price pressures. Traders raised bets the Fed will roll out another half-point interest-rate hike in September — following similar increases in June and July. Russia’s war in Ukraine and China’s Covid lockdowns are creating shortages and stoking costs.
For equities, “we’re seeing the beginning of the capitulation and the great reset, if you want, in pricing,” Virginie Maisonneuve, global chief investment officer for equity at Allianz Global Investors UK, said on Bloomberg Television. “Right now the big question is peak inflation.”
Fed officials appear to be sticking with their approach of raising rates by a half point at each of their next two meetings. But Fed Bank of Atlanta President Raphael Bostic said he’s open to boosting borrowing costs to restrict economic growth if inflation persists at elevated levels.
“Until we get a meaningful move lower in inflation, not only one print, but a consistent two, three, four prints moving in the right direction, this market may remain range bound,” Mona Mahajan, senior investment strategist at Edward Jones & Co., said on Bloomberg Television.
In China, Premier Li Keqiang urged officials to use fiscal and monetary policies to stabilize employment and the economy. Covid outbreaks there are sapping growth and snarling global supply chains.
China’s fourth-largest developer, Sunac China Holdings Ltd., said it didn’t pay a dollar-bond coupon before a Wednesday deadline and doesn’t expect to make payments on other notes, becoming the country’s latest builder to default.
Here are key events to watch this week:
- San Francisco Fed President Mary Daly speaks, Thursday
- US PPI, initial jobless claims, Thursday
- University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.6% as of 10:49 a.m. in Tokyo. The S&P 500 fell 1.7%
- Nasdaq 100 futures added 0.8%. The Nasdaq 100 fell 3.1%
- Japan’s Topix index fell 0.3%
- Australia’s S&P/ASX 200 Index lost 0.7%
- South Korea’s Kospi index fell 0.1%
- Hong Kong’s Hang Seng Index retreated 0.7%
- China’s Shanghai Composite Index rose 0.2%
- Euro Stoxx 50 futures fell 1.5%
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was at $1.0529
- The Japanese yen was at 129.87 per dollar
- The offshore yuan was at 6.7579 per dollar
- The yield on 10-year Treasuries declined two basis points to 2.90%
- Australia’s 10-year bond yield fell six basis points to 3.45%
- West Texas Intermediate crude was at $105.40 a barrel, down 0.3%
- Gold was at $1,858.45 an ounce, up 0.3%