BEIJING – Asian stock markets plunged on Monday ahead of a US inflation update that traders worry could lead to more interest rate hikes.
Tokyo, Hong Kong and Seoul declined. Shanghai Advanced. Oil prices declined.
Traders expect Tuesday’s inflation data to show that pressure on US prices is easing, which could encourage the Federal Reserve to ramp up efforts to calm business activity and hiring. They worry that a strong reading after projections for 2022 were revised last week will strengthen plans to keep rates high and possibly raise them.
The strong inflation data “could move through risk assets like a wrecking ball,” Stephen Innes of SPI Asset Management said in a report.
The Nikkei 225 fell 1.1% to 27,354.81 in Tokyo while the Shanghai Composite index rose 0.5% to 3,276.39. The Hang Seng in Hong Kong closed down 0.6% at 21,060.77.
The Kospi fell 0.9% to 2,447.77 in Seoul and Sydney’s S&P-ASX 200 lost 0.3% to 7,410.30. New Zealand and Singapore retreat while Jakarta gains.
On Friday, Wall Street’s benchmark S&P 500 index rose 0.2% to 4,090.46. The index ended the week down 1.1%, its biggest weekly decline since December.
The Dow Jones Industrial Average rose 0.5% to 33,869.27. The Nasdaq fell less than 0.1% to 11,718.12.
Stocks have been rallying since last month on hopes that the Fed could start cutting rates later this year. This is despite warnings by Chair Jerome Powell that rates will be raised for an extended period until inflationary pressures abate.
Other central banks in Europe and Asia have also raised rates to reduce inflation.
Wall Street raised speculation about how high the Fed could raise rates after Powell said last week that there is a “significant road ahead” to reduce inflation to its 2% target. He cautioned against expecting inflation to “go away quickly and painlessly”.
The US government revised December’s inflation to 0.1% from the previous month, up from an earlier estimate of a decline of 0.1%. The November figure was raised to 0.2% from 0.1% in the previous month.
Traders expect Tuesday’s report that consumer prices rose 0.5% in January from the previous month.
The yield on the 10-year Treasury bond, or the difference between the market price and the payment at maturity, rose to 3.73% from 3.66% on Friday.
The yield on the two-year Treasury ticked up to 4.48% to 4.50%. It stood at 4.08% a week ago and is near its highest level since November.
Equity analysts have cut first-quarter earnings for companies in the S&P 500 by 4.5% due to the impact of inflation and slowing economic activity, according to strategists at Credit Suisse.
News Corp fell 9.4% after the owner of The Wall Street Journal and other media reported weaker-than-expected quarterly results. Expedia lost 8.6% after reporting weaker profit and revenue for the latest quarter than expected.
Oil prices fell on Friday after Russia announced plans to cut production by 500,000 barrels per day next month. Western nations have put an upper limit on how much customers are allowed to pay for Russian crude in a bid to punish Moscow for its invasion of Ukraine.
In energy markets, benchmark US crude declined 75 cents to $78.97 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose by $1.66 to $79.72 on Friday. Brent crude, the price base for international oil trading, fell 71 cents to $85.68 a barrel in London. It rose $1.89 to $86.39 on Friday.
The dollar rose to 131.85 yen from Friday’s 131.50 yen. The euro declined from $1.0672 to $1.0666.
Source: www.bing.com
