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Asia Pacific stocks down following U.S. inflation data

inflation data

Nikkei 225 fell 2.57%, KOSPI fell 2.77%, Hang Seng Index was down 2.63%, Shanghai Composite was down 1.01%, while the Shenzhen Component was down 0.85%

Asia Pacific stocks were down on Monday morning following a surprise U.S. inflation data that raised the possibility of an intensified monetary tightening from the U.S. Federal Reserve.

Japan’s Nikkei 225 fell 2.57%. South Korea’s KOSPI fell 2.77%. Hong Kong’s Hang Seng Index was down 2.63%. China’s Shanghai Composite was down 1.01%, while the Shenzhen Component was down 0.85%.

Investors are also concerned about the resume of stringent COVID-19 curbs in China could hurt the global economy and supply chains. Beijing’s most populous district of Chaoyang announced on Sunday three rounds of mass testing as it saw clusters of COVID-19 outbreaks.

Australian markets are closed for a holiday.

The U.S. consumer price index released Friday rose 8.6% in May year-on-year, a fresh 40-year high, adding to investors’ concerns about a recession caused by tightening monetary policies.

Shorter-dated Treasury yields surged, and 30-year Treasuries are below those on five-year notes, over the recession fears.

Many investors now expect half-point interest rate hikes this week and in July and September, while some investors bet on an even bigger 75-basis-point move is possible at the Federal Reserve’s June meeting.

The inflation data are game-changers that force the Fed to switch to a higher gear, front-loading policy tightening, Jefferies strategist Aneta Markowska said in a note, lifting a call for this week’s decision to a 75-basis point hike.

Inflation isn’t peaking, it isn’t even plateauing. It is still accelerating, and it will likely do so in June as well, the note added.

On the data front, U.S. PPI is due on Tuesday, and China’s key economic activity data including industrial production is due the day following.

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