Asian Stocks Down Over Increased Inflation Fears as Commodity Prices Surge

This post was originally published on this site – Asia Pacific stocks were down Tuesday morning, following a tech-led slide in U.S. counterparts as a surge in commodity prices increases inflation worries.

China’s Shanghai Composite was down 1.07% by 10:30 PM ET (2:30 AM GMT) and the Shenzhen Component fell 1.19%. Inflation data for April released earlier in the day said that the Consumer Price Index (CPI) contracted 0.3% month-on-month but grew 0.9% year-on-year, both just missing expectations. The Producer Price Index (PPI) grew a better-than-expected 6.8% year-on-year.

Hong Kong’s Hang Seng Index fell 2.47%.

Japan’s Nikkei 225 slid 2.89% even as data released earlier in the day said that March’s household spending grew at a better-than-expected 7.2% month-on-month and 6.2% year-on-year.

The yearly figure was also the biggest gain since September 2019 and the first growth in four months. However, with a state of emergency in Tokyo and the surrounding areas currently in place, and debate on whether to extend it to other areas reportedly underway, spending is likely to remain under pressure.

In Australia, the ASX 200 was down 1.31%. Investors await the federal budget, which will be handed down later in the day.

South Korea’s KOSPI fell 1.53%.

U.S. shares also closed on a down note over inflation concerns, with the Nasdaq 100 Index tumbling 2.6% and the benchmark S&P 500 Index falling from its recent record high.

On the crude oil front, Colonial Pipeline is targeting re-opening its key U.S. pipeline by the end of the week. Also on investors’ radars are the recent jumps in commodities such as copper and iron ore, with concerns over knock-on price pressures continuing to grow.

This led to a slight lift in Treasury yields, with the benchmark 10-year at 1.60%.

The jumps come ahead of the release of U.S. inflation data, including core CPI, on Wednesday. With investors concerned that inflation could force the U.S. Federal Reserve to raise interest rates sooner than expected, the data will be closely watched.

Some investors are already bracing for an upcoming period of volatility.

“We’re going to see volatility definitely over the next couple of months” given uncertainty over the path of growth, Citi Private Bank head of capital markets in the Americas Kristen Bitterly told Bloomberg.

“Cash and duration are punitive, so you need to make sure that where you have that yield is non-rates sensitive parts of the market,” she added.

On the central bank side, several Fed officials are due to speak throughout the week, including Governor Lael Brainard later in the day. In the U.K., Bank of England Governor Andrew Bailey will speak on Wednesday.

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