Asian markets fell Thursday, tracking losses on Wall Street fuelled by growing inflation concerns and talk that central banks will have to tighten their monetary policies quicker than anticipated.
While recent data and healthy corporate earnings indicate that consumers continue to spend, traders are increasingly fearful that more than a year of massive financial support — coupled with rocketing demand and supply chain snarls — could send prices out of control.
Figures Wednesday showed inflation in the United Kingdom at a decade high and an 18-year peak in Canada — a week after US figures came in at levels not seen since 1990.
The data — which mirror big gains in other countries — have ramped up pressure on policymakers to act soon, with some commentators warning of a possible recession if they did not.
And eyes are focused on the Federal Reserve — the central bank of the world’s top economy — whose massive bond-buying programme has been a key pillar of support to the global recovery and rally in stock markets.
Officials have said they will begin winding back the so-called quantitative easing measures gradually from this month and not be in any rush to hike interest rates, saying the inflation surge is only temporary.
But an extended period of reports of soaring prices could force them to re-evaluate their plans.
“With these most recent inflation readings, there is some concern that the Fed will reduce the amount of purchases — accelerate that tapering,” Michael Arone, of State Street Global Advisors, told Bloomberg Television.
“That would be a surprise to markets and could induce some volatility.”
All three main indexes on Wall Street ended in the red, and Asia followed suit.
Hong Kong, which fell Wednesday after six straight days of gains, extended losses with tech firms among the biggest losers, while Tokyo, Shanghai, Singapore, Seoul, Wellington, Manila and Jakarta also suffered sizeable selling.
Oil retreated further, having seen a substantial drop the day before, on worries about demand, and after Joe Biden and Chinese counterpart Xi Jinping discussed releasing some of their countries’ massive reserves to address a spike in prices that is partly fanning inflation.
“Inflationary pressures are heating up everywhere and that has some investors nervous about the short-term growth outlook, which could also translate to softer crude demand,” said OANDA’s Edward Moya.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 0.8 percent at 29,451.41 (break)
Hong Kong – Hang Seng Index: DOWN 1.5 percent at 25,268.79
Shanghai – Composite: DOWN 0.6 percent at 3,516.20
Dollar/yen: DOWN at 113.95 yen from 114.09 yen at 2145 GMT
Euro/dollar: UP at $1.1336 from $1.1326
Pound/dollar: UP at $1.3498 from $1.3493
Euro/pound: UP at 83.98 pence from 83.91 pence
West Texas Intermediate: DOWN 0.8 percent at $77.73 per barrel
Brent North Sea crude: DOWN 0.4 percent at $80.00 per barrel
New York – Dow: DOWN 0.6 percent at 35,931.05 (close)
London – FTSE 100: DOWN 0.5 percent at 7,291.20 (close)
