Wall Cent declines in Asian markets due to inflationary crisis


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Updated with Hong Kong Alert Series

Markets in Asia fell on Monday to continue the global decline, while the dollar rose on US inflation forecasts and bets on the US Federal Reserve’s more aggressive campaign to hike interest rates.

Fresh Covid outbreaks in Shanghai and Beijing also led officials to reconsider containment measures soon after they were lifted, stoking fears about the world’s second-largest economy.

The prospect of more sanctions in China’s biggest cities also weighed on oil prices, with a possible slowdown in the US and a stronger dollar putting pressure on black gold.

Investors were surprised on Friday when data showed US inflation rose 8.6 percent in May, the fastest pace since December 1981, when the Ukraine war and China’s lockdowns pushed up energy and food prices.

The numbers have prompted speculation that the Fed will now consider raising interest rates by 75 basis points at some point, although it is expected to still hold the announced half-point hike at its meeting this week.

As the central bank is forced to act more aggressively, there are concerns that the US economy could be plunged into recession next year.

Stephen Innes of SPI Asset Management said: “There has been a cautious calm in markets over the last few weeks – interest rates are nothing unexpected and stocks have been able to post gains in the short term.”

“But the strength of[US consumer prices]totally outperformed this apple cart.

“The market is thinking too much now about the Fed raising rates at the peak of inflation and then scaling back when growth slows.”

And Mansoor Mohi-Uddin, chief economist at the Bank of Singapore, said officials would raise borrowing costs by 50 basis points for the next four sessions, eventually raising the overall interest rate to 4.0 percent by 2023.

Three of Wall Street’s main indices fell, with the Nasdaq taking the hardest hit as tech companies – most vulnerable to higher interest rates – took a hit, while European markets were also hit.

Asia followed, with Hong Kong, Tokyo and Seoul down more than three percent, while Mumbai, Jakarta, Taipei, Jakarta and Wellington fell more than two percent. Shanghai, Singapore, Manila and Bangkok also fell sharply.

Analysts at Goldman Sachs said in a note: “Eventually, financial conditions will tighten significantly and/or growth will slow to the point where the Fed may stop rising.

“But we’re still a long way from that point, which suggests exposure to bond yields, continued pressure on riskier assets and US dollar strength in general.”

The dollar continued to fuel hopes for a sharp rise in US interest rates, hitting a 24-year high of 135.19 yen while breaking above the 78 Indian rupee for the first time.

The greenback was also at multi-year highs against the euro and sterling.

“The background to the yen’s decline is the widening gap between long-term interest rates in Japan and the United States,” said Takahide Kinouchi, senior economist at the Nomura Research Institute, in a recent comment.

And as higher oil prices fuel US inflation, “expectations are mounting that aggressive US monetary tightening will continue for some time, leading to further rises in US yields.”

Oil prices plummeted, extending Friday’s return as China continues to hold on to an economically damaging zero-Covid policy to combat a new outbreak of the disease.

Parts of Shanghai went into lockdown again and mass testing of millions of people came just weeks after authorities in the country’s largest city lifted strict measures.

Tokyo – Nikkei 225: down 3.0 percent to 26,984.99

Hong Kong – Hang Seng Index: down 3.2 percent to 21,099.65

Shanghai – overall: down 1.1 percent to 3,247.23. Feather

Dollar/Yen: UP at 135.00 yen from 134.42 yen late Friday night

EUR/dollar: decline from $1.0526 to $1.0494

Pound/dollar: decline from $1.2309 to $1.2290

Euro/pound: down from 85.39p to 85.35p

Brent North Sea crude: down 1.6 percent to $120.09 a barrel

West Texas Intermediate: down 1.6 percent to $118.72 a barrel

New York – Dow: down 2.7 percent at 31,392.79 (almost)

LONDON – FTSE 100: down 2.1 percent at 7,317.52 (almost)




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