Rise in equities is buzzing with revived inflation fears

Employees of the currency trading company Gaitame.com work in front of screens showing the Japanese yen exchange rate against the US dollar, euro and Nikkei stock at the dealership in Tokyo, Japan on June 22, 2022. REUTERS / Issei Kato

TOKYO, June 22 (Reuters) – Asian stocks fell across the board on Wednesday, failing to extend Wall Street’s rally as persistent interest rate and inflation concerns remained a key focus for investors, while the Japanese yen hit a new low of 24 years against the dollar.

MSCI’s broadest index for Asia-Pacific equities outside Japan (.MIAPJ0000PUS) fell 1.39%, up 1.02% at its more than five-week low on Monday. Tokyo’s Nikkei (.N225) gave up early wins and was flat.

Investors continue to assess how concerned they must be that central banks are pushing the world economy into recession while trying to curb red-hot inflation with interest rate hikes.

Major US stock quotes rose 2% overnight due to the possibility that the economic outlook may not be as serious as expected during trading last week when the S&P 500 (.SPX) recorded its largest weekly percentage decline since March 2020.

But the increase in sentiment did not last long with the S&P 500 and Nasdaq futures, both falling almost 1% on Wednesday while EUROSTOXX 50 futures lost 1.3% and FTSE futures fell 0.9%.

“I think this recent rise in the bear market after the holidays is a reflection of the uncertainty investors have regarding whether we have seen the peak of inflation and Fed hawks or not – I think we are close,” said Invesco’s global market strategist for Asia Pacific David Chao.

“Although I suspect that global stock markets may end higher at the end of the year than where we are today, it is conceivable to expect continued market volatility until it becomes clear that the Fed will not force the US economy to contract to curb sustained levels of inflation. “

Chinese blue chips (.CSI300) lost 0.44%, Hong Kong’s Hang Seng Index (.HSI) fell 1.24% and South Korea’s KOSPI (.KS11) was down 1.82%.

US Federal Reserve Chairman Jerome Powell will begin his testimony to Congress on Wednesday with investors looking for further clues as to whether a new 75 basis point rate hike is on the horizon in July.

Economists asked by Reuters expect that the Fed will deliver an interest rate increase of 75 basis points next month, followed by an increase of half a percentage point in September, and that it will not step down to a quarter percentage point until November at. at the earliest. read more

Most other global central banks are in a similar situation, with the exception of the Bank of Japan, which last week promised to maintain its policy of ultra-low interest rates.

The gap between low interest rates in Japan and rising US interest rates has weighed on the yen, which reached a new 24-year low of 136.71 per dollar in early trading, before falling more firmly to 136.25.

Minutes from the Bank of Japan’s political meeting in April, which was published on Wednesday, showed the central bank’s concern about the impact the falling currency may have on the country’s business environment. read more

Other currency movements were more subdued on Wednesday, with the dollar index, which follows the dollar against six peers, a touch firmer at 104.62.

The yield on the benchmark index for US 10-year government bonds was fairly stable at 3.2617%.

Oil prices fell with US President Joe Biden waiting on Wednesday to demand a temporary suspension of the federal tax of 18.4 cents per gallon on gasoline, a source who informed the plan told Reuters.

Brent fell 3.37% to $ 110.79 a barrel, while US oil fell 3.71% to $ 105.46.

Spot gold fell 0.32% and traded at $ 1,826.72 per ounce.

Bitcoin lost 6.54% from its highest Tuesday, trading at $ 20,288 after falling as low as $ 17,592 last week.

Reporting by Sam Byford in Tokyo; Edited by Sam Holmes

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