Asian stocks tumble after BoE rate shock, high inflation in Japan By Investing.com

Investing.com — Most Asian shares fell sharply on Friday after a bigger-than-expected rate hike by the Bank of England fueled concerns about monetary policy tightening, while a blow to Japanese consumer inflation also rattled sentiment.

In addition to , risk-driven assets were also hit by some , who testified before Congress that the bank could raise interest rates at least twice more this year.

The two factors raised concerns about tightening global monetary policy, and saw investors largely dump risk-driven, interest rate-sensitive assets.

Hong Kong was the worst performer in Asia, down 1[ads1].8% in catch-up trade after a holiday on Thursday. The broader Chinese markets were closed for the day, but had closed lower on Wednesday after one in the country.

South Korea’s fell 0.7%, while Australia lost 1.1%, although data showed some improvement in manufacturing and service sector activity through June.

Japanese stocks tumble after inflation rose more than expected

Japan’s index fell 1.7%, while the decline eased 1.5% after data showed inflation grew more than expected in the 12 months to May.

While core inflation was lower than last month, a reading showing inflation excluding food and fuel costs rose to a 42-year high in May, indicating that underlying Japanese inflation remained high.

The trend points to increasing pressure on the Bank of Japan to tighten policy, although the bank reiterated that it has no plans to change its ultra-loose policy in the near future.

High inflation could also potentially offset the recent resilience seen in the Japanese economy, which had in part attracted a large dose of foreign buying in local stocks.

Investors used the high inflation as a catalyst to lock in recent gains in the Japanese market. Both the Nikkei and TOPIX had risen to 33-year highs earlier in the week.

Indian stocks will fall further from record highs

for India’s index pointed to a weak opening for local stocks, after both the Nifty and it retreated from record highs on Thursday.

While optimism over relative strength in the Indian economy drove a flurry of foreign buying into local markets, analysts recently warned that small and mid-cap stocks could see some correction, given their high valuations in a weak global economic environment.

Fears of a resurgence in Indian retail growth also returned, following a delay in the Indian monsoon.