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Asia Pacific stocks mostly down on inflation concerns


Nikkei 225 dropped 0.72%, KOSPI slipped 1.02%, the ASX 200 fell 0.71%, Hang Seng Index rose 0.28%, Shanghai Composite added 0.23% while the Shenzhen Component dropped 0.15%

Asia Pacific stocks were mostly down Wednesday morning, staying near one-month lows as investors remain concerned about the implications of faster inflation and the continuous surge in commodities on the global economic recovery from pandemic.

Japan’s Nikkei 225 dropped 0.72% by 2:36 AM GMT and South Korea’s KOSPI slipped 1.02%

In Australia, the ASX 200 fell 0.71%. The country’s 10-year bond climbed after the government handed down a big-spending budget to further boost the country’s economic recovery from the pandemic.

Hong Kong’s Hang Seng Index rose 0.28%.

China’s Shanghai Composite added 0.23% while the Shenzhen Component dropped 0.15%.

The most recent drop in global stocks has some investors confused as to the reason behind it.

There isn’t a clear catalyst behind this purge. It seems to be a combination of inflation fears making a comeback and some market participants moving higher along the value spectrum, cutting their exposure to anything with a stretched valuation, XM investment analyst Marios Hadjikyriacos told Reuters.

Meanwhile, U.S. Treasury yields advanced and the dollar, while inching up on Wednesday, traded near the lowest levels of 2021.

Investors now await U.S. inflation data for April, including the Consumer Price Index (CPI), due to be released later in the day alongside U.S. government debt sales. They are also bracing for the possibility that both events combined could trigger another bond selloff.

The data is forecast to show that inflation accelerated in April, with the lockdowns in 2020 as COVID-19 spread globally expected to amplify the year-on-year (YOY) figure.

The debate on whether the data will force the U.S. Federal Reserve to tighten its current dovish policy sooner than expected also continues. A slew of Fed officials has reiterated that the U.S. economic recovery, while on the right track, is not far enough and it is still too early to pull back the monetary support currently in place.

It’s all about inflation expectations, TD Securities global head of rates strategy Priya Misra told Bloomberg, adding that if the CPI indicates that inflation is likely to be higher for a while, I think the taper discussion will come back into the forefront and then we can get a bigger interest rate move.

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