Asian Stock Markets Decline After U.S. Inflation Edges Higher
The Asian stock markets faced a decline on Friday as U.S. inflation inched higher, causing concerns about the future of the largest global economy. The Shanghai Composite Index lost 1.2% in afternoon trading, reaching 3,216.68, while the Hang Seng in Hong Kong fell 0.4% to 19,165.89. In Seoul, the Kospi declined nearly 0.2% to 2,597.25, and Sydney’s S&P-ASX 200 sank 0.3% to 7,335.20. Traders hope that the U.S. inflation data will convince the Federal Reserve that inflation is under control and no further interest rate hikes are necessary.
On Wall Street, the S&P 500 index saw a slight gain of less than 0.1% after the release of the government data showing that consumer prices rose 3.2% in July, which was higher than the previous month but below expectations. This report sparked hopes among investors that the Federal Reserve will not implement any more rate hikes.
Stephen Innes of SPI Asset Management stated that despite the initial interpretation of the benign inflation report, investors quickly shifted concerns towards factors that could disrupt the narrative, such as high energy and food prices. It is important to note that on Thursday, the U.S. government reported that slightly more workers applied for unemployment benefits than expected, which might reassure the Federal Reserve that hiring is not contributing to upward pressure on prices. Moreover, big U.S. companies have been reporting better-than-expected profits, which has also helped support market sentiment.
The bond market saw the yield on the 10-year Treasury debt rise to 4.09% from 4.01%. In energy markets, benchmark U.S. crude lost 14 cents to reach $82.68 per barrel, while Brent crude, the basis for international oil trading, declined 14 cents to $86.26 per barrel. The dollar inched down to 144.70 Japanese yen, while the euro held steady at $1.0990.
As investors await further reports on inflation and hiring, the outcome of the Federal Reserve’s next meeting in September will likely be influenced by the data released prior to the meeting. The reports will be crucial in determining whether the Fed will hold rates steady or consider further rate hikes to combat rising inflation.
Analyst comment
Neutral news. The Asian stock markets declined due to concerns about U.S. inflation, but there is hope that the data will convince the Federal Reserve that no further rate hikes are necessary. The outcome of the Fed’s next meeting in September will depend on further reports on inflation and hiring.
