Asian shares declined in early trade as Wall Street retreated on worries about accelerating inflation. This prompted investors to cut back on their exposure to growth-focused stocks on bets of higher interest rates in the not-too-distant future.
A host of Federal Reserve speakers will likely to give markets plenty to consider as policymakers assess how best to respond in this pandemic situation in some economies. When the Labour Department releases its latest consumer price index, a test case on U.S. inflation is likely to come.
Hong Hao, head of research at BoCom International said that the markets reversed its course overnight as inflation fears drove investors away from growth stocks and notably the tech stocks, to pick cyclicals. He also added that the Asian markets today will follow the U.S. trend and several Chinese tech stocks will in particular be under big pressure because of the pending antitrust penalty. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.7%, with Australian stocks off 1.2% and Tokyo’s Nikkei 2.63% lower in early trade.
Wall Street closed lower as inflation jitters drove investors away from market-leading growth stocks in favour of cyclicals, which stand to benefit most as the economy gathers momentum. Speculation that growing price pressure would erode the dollar’s value kept the U.S. currency near a 2-1/2-month low. As investors adjust their expectations for when the U.S. Federal Reserve will start tapering bond purchases and raising interest rates as the U.S. economy gains momentum, treasuries and the dollar have swung back and forth.
The two-year yield, touched 0.1528% compared with a U.S. close of 0.153%. Oil prices gave up earlier gains as concerns that rising covid cases in Asia will dampen demand outweighed expectations that a major U.S. fuel pipeline could restart within the week following a cyber-attack.
