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Asia Pacific stocks mostly down, inflation risks continue

inflation risks

KOSPI dropped 0.96%, Hang Seng Index slumped 3.16%, Nikkei 225 added 0.57%, ASX 200 climbed 1.13%, Shanghai Composite shed 0.78% and Shenzhen Component was down 0.71%

Asia Pacific stocks were mostly down on Monday morning. Inflation risks from commodity-supply disruptions continue, with the U.S. Federal Reserve widely expected to hike interest rates in its latest policy decision.

Japan’s Nikkei 225 added 0.57% by 2:37 AM GMT while South Korea’s KOSPI dropped 0.96%.

In Australia, the ASX 200 climbed 1.13%.

Hong Kong’s Hang Seng Index slumped 3.16%. China’s Shanghai Composite shed 0.78% and the Shenzhen Component was down 0.71%.

The Nasdaq Golden Dragon China Index sank 10% during the previous week, which dampened the mood in Hong Kong alongside the persistently high number of cases in the city’s fifth wave of COVID-19. China is also dealing with a growing outbreak which put the southern city of Shenzhen under a lockdown.

Chinese data, including fixed-asset investment, industrial production, retail sales, and the unemployment rate, is due on Tuesday.

U.S. Treasuries extended a downward trend, with the five-year U.S. yield above 2% for the first time since May 2019. This, and a 12% drop in global stocks this year, continue to drive worries that tightening monetary policy and soaring energy, grain, and metal costs could slow down the economic recovery.

We are experiencing extraordinary volatility in global equities compounded by wavering market sentiment, and the risk of recession intensifies on spiralling commodity prices, Federated Hermes portfolio manager for global equities Louise Dudley said in a note.

We expect ongoing swings in the short term as geopolitical uncertainty over Russian crude persists, Dudley said.

Investors now await the Fed’s policy decision, due to be handed down on Wednesday. However, the central bank ‘is really stuck between the real economy and the financial economy,’ Bain & Co. global head of macro research Karen Harris told Bloomberg.

Harris said: You have mainstream struggling with inflation, that’s why we are set to see these rises coming in March. On the other side, we are trying not to prick the financial economy. Either path is deflationary, recessionary.

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