Asia’s markets major markets fell back on Tuesday as gloomy investors worried about the brewing energy crisis, spiking inflation, signs of a slowdown in the global economy and an end to central bank financial support.
World markets have come under pressure in recent weeks as the reopening of economies and supply chain snarls ramp up inflation, with a rally in commodity prices a major factor.
All eyes are on the release this week of inflation data in the United States and China, with expectations for multi-high readings that will add pressure on central banks to tighten monetary policy.
The Federal Reserve has already signalled it will begin tapering its vast bond-buying programme by the end of the year as it looks to prevent prices from running out of control and the economy overheating.
While the move has been widely expected for some time, consistently high inflation is increasing the likelihood that interest rates will rise as early as next year.
The Bank of England appears close to lifting borrowing costs sooner than later, while New Zealand and South Korea have already done so.
The pressure to hike is coming as energy prices rocket to multi-year or record highs as demand ramps up ahead of the northern hemisphere winter, at the same time as supplies are limited in the wake of pandemic lockdowns.
The issue is hitting countries across the planet and increasing worries of a worldwide fuel squeeze, with WTI oil hitting a seven-year peak, while Chinese coal prices are at a record. WTI and Brent were slightly higher on Tuesday and some observers are predicting they could hit $100 by the year’s end.
Debt Woes Cast Shadow
China’s ongoing crackdown on the private sector and the debt woes of the country’s property giant Evergrande also dampened the mood.
Hong Kong, Shanghai, Tokyo, Sydney, Seoul, Singapore, Taipei, Manila and Wellington were all in negative territory, with a little profit-taking after recent gains adding to the weakness. Bangkok, Jakarta and Mumbai bucked the trend, however.
The Hang Seng Index dropped 1.43%, or 362.50 points, to 24,962.59. The Shanghai Composite Index slipped 1.25%, or 44.77 points, to 3,546.94, while the Shenzhen Composite Index on China’s second exchange eased 1.65%, or 39.64 points, to 2,363.81.
The benchmark Nikkei 225 index lost 0.94%, or 267.59 points, to 28,230.61 yen, while the broader Topix index fell 0.70%, or 13.90 points, to 1,982.68.
Long-term Inflation Fears
Tapas Strickland, at National Australia Bank, warned: “The rise in energy prices is fuelling concerns that the transitory lift in inflation seen in the wake of the pandemic may prove to be longer lasting.”
Investors are also awaiting the beginning of the corporate earnings season, which gets underway this week with US banking giants.
The readings will be closely watched for an idea about how firms are faring in light of the fast-spreading Covid Delta variant and rising inflationary pressures.
While this round is tipped to be strong, analysts said the key will be forecasts for the next three months and into 2022.
Tokyo > Nikkei 225: DOWN 0.9% at 28,230.61 (close)
Hong Kong > Hang Seng Index: DOWN 1.4% at 24,962.59 (close)
Shanghai > Composite: DOWN 1.3% at 3,546.94 (close)
New York > Dow: DOWN 0.7% at 34,496.06 (close)
- AFP with additional editing by Sean O’Meara