Asian Stocks Increase Global Drop Amid Inflation Fears

  • Asia Pacific Shares Down 1.3% After Falling On Wall Street The Day Before
  • The specter of stagflation knocks bond yields off their 4-month peak
  • China’s electricity shortage and tight regulation shook markets

TOKYO, Oct 1 (Reuters) – Asian stocks fell sharply in the wake of Wall Street and bonds rose on Friday as risk sentiment deteriorated amid growing fears that inflation could persist even after the peak of global economic growth.

Japan’s Nikkei (.N225) fell 2.52% to its lowest level since September 3, while Australian stocks (.AXJO) fell 2.02%, South Korean Kospi (.KS11) lost 1.50%, and Taiwan Index (.TWII) was down 2.18%. …

The MSCI Asia Pacific Stock Index (.MIAP00000PUS) fell 1.33% to its lowest level since Aug.24.

Chinese markets are closed for the week from Friday for Golden Week.

“You can argue whether this is really stagflation or not, but the overall background of growth and inflation seems to have just tilted towards less favorable,” said Rob Carnell, head of research in the Asia-Pacific region of ING in Singapore.

“Whether this will actually take root and create problems for years to come, we don’t need to know right now – scary enough that what we see in the markets is justified.”

US equity futures pointed to a 0.60% decline in the S&P 500 after falling 1.19% overnight (.SPX) in its worst month since March last year.

Nasdaq futures also dropped 0.61%, adding 0.43% to Thursday’s losses.

The MSCI Global Stock Index (.MIWD00000PUS) fell 0.27% on Friday, hitting its lowest since July 20.

Meanwhile, the benchmark 10-year Treasury bond continued to rally in Tokyo, with yields falling to their lowest level since September 28 at 1.4754%. Just three days earlier, it was at the peak of the more than four-month rate of 1.567%.

The dollar index, which measures the currency against its six major competitors, was below Thursday’s annual high of 94.504, last changing hands at 94.286.

The safe-haven yen bounced from its lowest level since February last year at 112.08 per dollar on Thursday to 111.21.

The risk-sensitive Australian dollar fell 0.26% to $ 0.72075, returning to a midweek monthly low of $ 0.71705.

Federal Reserve Chairman Jerome Powell said Wednesday that addressing the “tensions” between high inflation and high unemployment is the Fed’s most pressing challenge, recognizing a potential conflict between the two goals of the US central bank – stable prices and full employment. More details

A meeting of the Federal Open Markets Committee last week confirmed expectations regarding the start of a gradual reduction in asset purchases in November, and the rate hike will occur next year.

The latest clues on the way to normalize the Fed’s policy were data on personal spending and the deflator of basic consumption in the US later in the day.

“Rising employment costs and high inflationary expectations suggest that a sharp drop in inflation under the interim FOMC is becoming increasingly unlikely,” strategists at Commonwealth Bank of Australia wrote in a note to a client.

China has proven another particular concern for investors: the economy has been hit by regulatory constraints in the technology and real estate sectors and is now grappling with electricity shortages that threaten to drive up energy prices around the world. More details

However, on Friday, oil prices continued to decline after the price of Brent crude exceeded $ 80 a barrel earlier in the week, for the first time in three years.

Brent crude oil futures fell 0.22% since Thursday to $ 78.14, while US crude oil futures fell 0.25% to $ 74.83.

Gold, an inflation hedge and safe haven, fell 0.3% to $ 1,751.43 an ounce after rising 1.77%, the biggest since March on Thursday.

Reporting by Kevin Buckland; Editing by Lincoln Feast.

Our Standards: Thomson Reuters Trust Principles.

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