Asian shares were on the slide on Monday as worries over soaring inflation and more impending interest rate hikes dominated the mood on trading floors.
The region’s major bourses began the week in downbeat mood, giving up their gains from last week off the back of hopes China’s easing of its economically painful Covid curbs could signal a turnaround for the world’s No2 economy.
Instead, US data showing sticky inflation raised worries that the Federal Reserve may keep interest rates higher for longer.
Japan’s Nikkei share average retreated from a one-week high, as its tech and other so-called growth shares sagged after US producer price data on Friday suggested inflation could prove more persistent than previously thought, ahead of a consumer price report on Tuesday and the Fed policy decision the following day.
However, Toshiba bucked the trend, rising almost 2% amid reports that Japan Industrial Partners has moved closer to securing bank financing for a buyout.
The benchmark Nikkei 225 index dropped 0.21%, or 58.68 points to end at 27,842.33. The broader Topix index fell 0.22%, or 4.23 points, to 1,957.33.
“Japanese investors are worried about prolonged US interest rate increases, and you can see that in the names that are leading declines,” Maki Sawada, a strategist at Nomura, said in a call with journalists.
“But investors really want to see what the FOMC [Federal Open Market Committee] will do, so I don’t expect trading leading up to that to give much indication of market direction.”
MSCI’s broadest index of Asia-Pacific shares outside Japan slumped 1.2%, erasing almost all of the previous week’s gains.
Chinese bluechips dropped 1.1%, while Hong Kong’s Hang Seng index was down, as investors’ focus shifted away from crippling Covid-19 curbs to the surge in infections that is now disrupting the economy.
The Hang Seng Index dropped 2.20%, or 437.24 points, to 19,463.63.
The Shanghai Composite Index dipped 0.87%, or 27.91 points, to 3,179.04, while the Shenzhen Composite Index on China’s second exchange dropped 0.67%, or 13.97 points, to 2,061.87.
Elsewhere across the region, Indian stocks rose with Mumbai’s signature Nifty 50 index up 0.02%, or 3.10 points, to close at 18,499.70.
Global stocks fell as investors braced for the latest round of transatlantic interest rate hikes this year from a trio of central banks, hoping that a hitherto hefty pace of increases in borrowing costs will finally show signs of easing.
Oil prices rose as a key pipeline supplying the United States remained shut, while Russian President Vladimir Putin threatened to cut production in retaliation for a Western price cap on its exports.
The dollar rose against the Japanese yen but eased against a basket of currencies after data on Friday showed US producer prices had risen more than expected last month.
The MSCI all country stock index was down 0.3%, the benchmark having lost about 18% so far this year, wiping out all gains chalked up in 2021. In Europe, the STOXX index of 600 companies was down 0.7%.
Economists expect the Federal Reserve on Wednesday, and the European Central Bank and Bank of England on Thursday to all raise rates by 50 basis points, still a slowing down from the 75 basis point hikes seen in recent meetings.
The focus will also be on the US central bank’s updated economic projections and Fed Chair Jerome Powell’s press conference.
Kevin Cummins, chief US economist at NatWest, said any surprise in the November CPI report was unlikely to shift the Fed from a 50-basis-point rate hike, although it would play a bigger role in the policy statement and the tone of Powell’s press conference.
In currency markets, the US dollar eased 0.143% to 104.89, although it was not too far away from the five-month trough of 104.1 a week ago.
Treasury yields held largely steady on Monday. The yield on benchmark 10-year Treasury notes eased to 3.5433%, compared with its US close of 3.5670%. The two-year yield touched 4.3294%, down slightly from its US close of 4.330%.
Brent crude futures were off 0.4% at $75.77 a barrel while US West Texas Intermediate crude was at $70.84 a barrel, off 0.3%. Spot gold was 0.4% lower at $1,790 per ounce.
Tokyo – Nikkei 225 < DOWN 0.21% at 27,842.33 (close)
Hong Kong – Hang Seng Index < DOWN 2.20% at 19,463.63 (close)
Shanghai – Composite < DOWN 0.87% at 3,179.04 (close)
London – FTSE 100 < DOWN 0.25% at 7,457.64 (0940 GMT)
New York – Dow < DOWN 0.90% at 33,476.46 (Friday close)
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