Asian Stocks Turbulent Ahead of US Inflation Data

Diana Ember
Diana Ember Economy Finance
4 Min Read

On Monday, many Asian markets plummeted as they awaited U.S. inflation data that could potentially result in higher interest rates. Tokyo, Hong Kong, and Seoul saw declines, while Shanghai experienced an increase in its stocks; oil prices also decreased. Traders remain hopeful that Tuesday’s data will reflect subdued pressure on US prices, which may encourage the Fed to ease up their attempts to lower business activity and hiring levels – however, if the results show otherwise following last week’s revision of estimates for 2022 inflation then it is highly likely there will be plans to keep high or even raise the current rate further.

Inflation Data Expectations Affected Asian Markets

Stephen Innes of SPI Asset Management cautioned in a report that the impact of strong inflation figures can be drastic and far-reaching, describing it as “a wrecking ball” to risk assets. This means that some Asian markets are expected to fall. Reflecting this sentiment, Tokyo’s Nikkei 225 dipped 1.1%, whereas Shanghai Composite Index rose 0.5%. Meanwhile, Hong Kong’s Hang Seng lost 0.6%, and Seoul’s Kospi declined by 0.9%. Sydney’s S&P ASX 200 also saw a decrease at 0.3%, with New Zealand and Singapore following suit, yet Jakarta saw an upturn.

The famous S&P 500 index’s Friday trading session marked a 0.2% increase to 4,090.46 and concluded the week with an overall decrease of 1.1%, its biggest drop since December 2020. Results were a bit more optimistic for the Dow Jones Industrial Average as it saw an impressive surge by 0.5% to 33,869-27, while Nasdaq fell slightly less than 0 % at the 11,718-12 punctuation mark. Investors have been fervently investing in stocks lately due to Fed Chair Jerome Powell’s statements that imply possible cuts on interest rates later this year despite releasing a cautionary statement regarding inflation pressure constancy until further notice from him.

asian stocks turbulent ahead of us inflation data

The US Market Is Also Getting Ready For The Developments

After Fed Chair Jerome Powell expressed his belief that there is a tedious journey before inflation can be brought to the 2% target, Wall Street raised its forecast of how high it might raise interest rates. The U.S government has reassessed December’s inflation rate from a 0.1% decline over the previous month to a 0.1 % increase, and November was revised upwards from a 0.1% uptick in prices for goods and services to an impressive0 .2%. With Tuesday’s report projected to signify consumer prices rose by a notable 0.5% over last month, traders are extremely optimistic about future outcomes regarding rate hikes and deflation efforts made by the Fed.

Last Friday, the yield on the 10-year Treasury bond grew to 3.73%, a significant increase from 3.66% just days before. Notably, the two-year Treasury yielded 4.50%, markedly higher than its previous rate of 4.08%. Unsurprisingly, Credit Suisse strategists reported that equity analysts had reduced S&P 500 companies’ first-quarter earnings forecasts by a stunning 4.5% due to inflation’s adverse effects and slowing economic growth worldwide.

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