Asian stocks retreat as inflation augurs Fed rate hikes
Shares were mostly lower in Asia on Thursday after the latest report of surging prices in the US appeared to keep the Federal Reserve on track to raise interest rates in coming months.
Tokyo, Shanghai, Hong Kong and Seoul were lower while Sydney advanced. US futures declined, with the contracts for both the S&P 500 and the Dow industrials 0.1% lower.
Surging coronavirus cases in Asia have raised uncertainty about the pace of recovery from the pandemic.
The omicron coronavirus variant has swept across Australia and other countries in the region despite high vaccination rates and strict border policies. Japan reported more than 13,000 new infections on Wednesday, the highest level in four months. China, whose zero-Covid policies are being challenged by outbreaks just weeks ahead of the Beijing Winter Games, is testing and in some cases locking down entire cities.
Tokyo’s Nikkei 225 index dropped 1% to 28,489.13, while the Shanghai Composite shed 1% to 3,560.59. In Seoul, the Kospi lost 0.4% to 2,962.09.
The Hang Seng in Hong Kong edged 0.1% lower, to 24,379.67 and the S&P/ASX 200 added 0.5% to 7,474.40. India’s Sensex edged 0.1% higher.
Taiwan’s benchmark rose 0.3% after TSMC, the world’s largest contract manufacturer of computer chips, reported a record quarterly profit of just over $6 billion.
The yield on the 10-year Treasury was steady at 1.74%.
Apart from the direct impact from big coronavirus outbreaks on normal business activity, spillover effects on manufacturing and shipping could further hinder a rebound from the past two years of disruptions.
“So far, the market’s reaction to the omicron wave has been moderate, but it is worth paying attention to worries about further impacts to global supply chains which could trigger risk-off trade,” Anderson Alves of ActivTtrades said in a report.