HONG KONG, May 12 — Asian equities slumped today following Wall Street’s lead, after a key US report renewed fears of inflation and a tightening of monetary policies.
Stocks have been volatile for much of 2022, fuelled by China’s Covid-19 lockdowns, Russia’s invasion of Ukraine, and surging inflation that has dampened consumer sentiment.
Investors had been looking to the April US consumer price report in hopes that easing inflation would lower pressure on the Federal Reserve to hike interest rates, but the rise of 8.3 per cent was higher than expected.
“Wall Street thought it was going to be done with inflation rearing its ugly head, but that does not appear to be the case,” said Edward Moya, senior market analyst at OANDA.
“Inflation is still expected to decelerate over the next few months, but it won’t be sharp given the rising prices on gas, hotel, airfares, and possibly a wide range of goods that will be impacted by China’s Covid lockdowns.”
Americans have felt the pinch of rising food prices, including big increases in dairy and cereal products.
The index for meat, poultry, fish and eggs surged 14.3 per cent — the biggest gain since May 1979.
US President Joe Biden called April’s overall slowdown “heartening” — March saw a peak of 8.5 per cent — but acknowledged inflation was still a major challenge.
“Bringing it down is my top economic priority,” he said.
After the release of the report, US stocks see-sawed through the day and ended with losses.
All three major indices finished firmly in the red. The tech-rich Nasdaq slumped 3.2 per cent, weighed by big losses for Apple and Meta.
The mood filtered to Asia — Tokyo, Hong Kong, Sydney and Seoul were negative all day.
In Europe, London plunged two per cent at the open.
“We’re seeing the beginning of the capitulation and the great reset, if you want, in pricing,” Virginie Maisonneuve, global chief investment officer for equity at Allianz Global Investors UK, told Bloomberg.
‘Choppy’ crude prices
Oil prices jumped around five per cent before paring some of those gains as concerns persisted about Russian energy supplies.
Ukraine said Russia had halted gas supplies through a key transit hub in the east of the country, fuelling fears that Moscow’s invasion could worsen an energy crisis in Europe.
The “choppy” nature of crude prices is also due to uncertainty about “the timing of an EU ban on Russian oil imports”, said Michael Hewson at CMC Markets.
The lockdowns in China also affected sentiment.
Millions in the world’s second-largest economy have been under lockdown since April, including in its economic engine shanghai. The restrictions have stopped up ports and snarled supply chains around the world.
China’s zero-Covid policy “will continue crimping growth, but it won’t be immune from the Ukraine/Russia stagflationary wave either”, said Jeffrey Halley, senior market analyst at OANDA.
Key figures at around 0720 GMT
Tokyo — Nikkei 225: DOWN 1.8 per cent at 25,748.72 (close)
Hong Kong — Hang Seng Index: DOWN 2.4 per cent at 19,354.39
Shanghai — Composite: DOWN 0.1 per cent at 3,054.99 (close)
London — FTSE 100: DOWN 2.3 per cent at 7,176.43
West Texas Intermediate: DOWN 2.4 per cent at US$103.21 per barrel
Brent North Sea crude: DOWN 2.1 per cent at US$105.24 per barrel
Euro/dollar: DOWN at US$1.0455 from US$1.0515 at 2050 GMT Wednesday
Pound/dollar: DOWN at US$1.2197 from US$1.2248
Euro/pound: DOWN at 85.72 pence from 85.84 pence
Dollar/yen: DOWN at 128.67 yen from 130.00 yen
New York — Dow: DOWN 1.0 per cent at 31,834.11 (close)
Bloomberg News contributed to this story — AFP
