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Asian Markets Stall As Traders Wait For US Inflation Data

A surge in prices has shortened the odds on the Federal Reserve lifting interest rates after it has wound down its massive bond-buying programme

Supply chain issues, surging demand and rising fuel costs have sent inflation soaring in recent months. AFP photo.

 

Asia’s markets endured a mixed day as investors watched for key US inflation data that could play a major role in the Federal Reserve’s plans to tighten monetary policy, while concerns over a global energy crunch also unsettled traders across the region.

With the world’s top economy well on the recovery track, the US central bank has already signalled it will begin to wind back the massive financial support put in place at the start of the pandemic.

But supply chain bottlenecks, surging demand fuelled by reopenings and spiking fuel costs have sent inflation soaring in recent months, putting pressure on bank chiefs to act to prevent prices from running out of control.

 

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An extended period of higher-than-targeted inflation is ramping up expectations that the Fed will have to lift interest rates after it has finished tapering its massive bond-buying programme.

And some analysts are now suggesting the first hike could come as soon as mid-2022, well before the early 2023 originally predicted.

The prospect of higher borrowing costs has put the brakes on a rally across global markets that has run for about a year and a half.

The upcoming earnings season is also being nervously watched for an idea about the impact on company profits from trade bottlenecks and rising inflation, with forecasts for the fourth quarter of particular interest.

“There’s real damage that’s potentially lurking from the supply chain issues,” said John Kilduff of Again Capital. “It’s a real potential negative for the global economy.”

 

Hong Kong Typhoon

Wall Street’s three main indexes provided a tepid lead, and Asia struggled for direction. 

Tokyo, Sydney, Manila and Taipei edged down, though there were gains in Seoul, Singapore, Mumbai, Jakarta and Wellington. Hong Kong was closed because of a typhoon in the city.

The benchmark Nikkei 225 index lost 0.32%, or 90.33 points, to 28,140.28 while the broader Topix index closed 0.45%, or 8.85 points, lower at 1,973.83.

Shanghai rose after better-than-forecast export data and ahead of Thursday’s release of China’s inflation readings, with prices in the world’s number two economy also sharply higher.

 

Iran Oil Talks

Oil prices edged down having rallied to multi-year peaks on surging demand, with analysts suggesting that talks between world powers and Iran on the country’s nuclear programme provided some respite.

A deal could allow Tehran to start exporting crude globally again, easing some pressure on supplies ahead of the approaching northern hemisphere winter.

Limited stockpiles and the reopening of economies have sent prices of oil and other fuels soaring, raising concerns about the impact on the global economic recovery.

Meanwhile, Democrats’ suggestions that they could pare back US President Joe Biden’s multi-trillion-dollar infrastructure and social care proposals have lifted optimism they could get the bills through Congress.

 

MARKETS

Tokyo > Nikkei 225: DOWN 0.3% at 28,140.28 (close)

Shanghai > Composite: UP 0.4% at 3,561.76 (close)

Hong Kong > Hang Seng Index: Closed because of typhoon

New York > Dow: DOWN 0.3% at 34,378.34 (close)

 

  • AFP with additional editing by Sean O’Meara

 

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Sean OMeara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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