Asian Markets Tumble On US Inflation Data

Asian stock markets are trading mostly lower on Monday, following the broadly negative cues from Wall Street on Friday, as data showing a bigger than expected surge in U.S. inflation in May raised concerns about growth and the outlook for interest rates to trigger a sell-off in the markets. The imposition of fresh lockdown measures in several parts of Shanghai also weighed on sentiment. Asian markets closed mostly lower on Friday.

The inflation spike is likely to convince the Federal Reserve to follow through on its plans to aggressively raise interest rates in an effort to combat inflation. The Fed will announce its latest monetary policy decision on Wednesday, with the central bank widely expected to raise interest rates by another 50 basis points.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the inflation data raises the possibility the Fed could increase rates by 75 basis points next week.

A separate report released by the University of Michigan showed consumer sentiment in the U.S. has tumbled to its lowest level on record in the month of June.

Meanwhile, China said it will reimpose Covid-19 lockdowns in eight out of 16 of Shanghai’s districts after the country’s largest economic hub recorded a cluster outbreak of COVID-19. Parts of Beijing have also reimposed some restrictions due to a surge in coronavirus cases.

The Australian stock market is closed on Monday on account of Queen’s Birthday. Australian stocks closed sharply lower on Friday.

In the currency market, the Aussie dollar is trading at $0.702 on Monday.

The Japanese stock market is sharply lower on Monday, giving up the gains in the previous session, with the Nikkei 225 plunging 700 points to fall below the 27,100 level, following the broadly negative cues from Wall Street on Friday, with technology stocks and other index heavyweights tumbling as data showing a bigger than expected surge in U.S. inflation in May raised concerns about growth and the outlook for interest rates.

The benchmark Nikkei 225 Index closed the morning session at 27,088.86, down 735.43 or 2.64 percent, after hitting a low of 27,008.49 earlier. Japanese shares ended sharply lower on Friday.

Market heavyweight SoftBank Group is losing almost 5 percent and Uniqlo operator Fast Retailing is declining almost 2 percent. Among automakers, Honda and Toyota are losing more than 3 percent each.

In the tech space, Advantest is losing more than 4 percent, while Tokyo Electron and Screen Holdings are declining almost 4 percent each. In the banking sector, Sumitomo Mitsui Financial is losing more than 1 percent, Mizuho Financial is down almost 1 percent and Mitsubishi UFJ Financial is declining almost 2 percent.

The major exporters are lower, with Panasonic losing more than 3 percent, Mitsubishi Electric down more than 2 percent, Sony slipping almost 4 percent and Canon declining more than 1 percent.

Among the other major losers, Omron and Kubota are sliding almost 6 percent each, while M3 and Denso are losing more than 5 percent each. CyberAgent, Recruit Holdings, Yamaha, Daikin Industries and Ebara are slipping almost 5 percent each, while Nippon Sheet Glass, Fujitsu, TDK and Shin-Etsu Chemical are down more than 4 percent each.

Conversely, Kansai Electric Power is gaining more than 3 percent.

In the currency market, the U.S. dollar is trading in the higher 134 yen-range on Monday.

Elsewhere in Asia, New Zealand, Hong Kong, South Korea and Taiwan are lower by between 2.3 and 2.8 percent each. Malaysia and Indonesia are down 1.5 and 1.9 percent, respectively. China and Singapore are down 0.8 and 0.7 percent, respectively.

On Wall Street, stocks moved sharply lower during trading on Friday with traders reacting negatively to a highly anticipated report on consumer price inflation. The steep drop on the day extended the sell-off seen over the course of Thursday’s session.

The major averages finished the day just off their lows of the session. The Dow slumped 880.00 points or 2.7 percent to 31,392.79, the Nasdaq dove 414.20 points or 3.5 percent to 11,340.02 and the S&P 500 tumbled 116.96 points or 2.9 percent to 3,900.86.

The major European markets also showed significant moves to the downside on the day. While the German DAX Index plunged by 3.1 percent, the French CAC 40 Index dove by 2.7 percent and the U.K.’s FTSE 100 Index tumbled by 2.1 percent.

Crude oil prices fell on Friday as the dollar surged higher after data showing a steep acceleration in U.S. inflation raised fears of more aggressive rate hikes by the Federal Reserve. West Texas Intermediate Crude oil futures for July ended lower by $0.84 or 0.7 percent at $120.67 a barrel.