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Asian stock markets follow Wall Street down

Wall Street down

US futures stabilised after the S&P 500 hit the lowest since March 2021 and the tech-heavy Nasdaq 100 shed about 3%

Asian stocks fell Thursday after elevated US inflation bolstered the case for aggressive monetary tightening and sparked a slide on Wall Street.

An Asian share gauge declined amid drops in Hong Kong and Japan and mixed performance in China. US futures stabilised after the S&P 500 hit the lowest since March 2021 and the tech-heavy Nasdaq 100 shed about 3%.

The Treasury curve has flattened on concerns that Federal Reserve monetary tightening will trigger an economic slowdown. The 10-year US yield slipped to 2.90%, the dollar dipped and oil held a rally on plunging US fuel inventories.

Hong Kong intervened after the city’s currency fell to the weak end of its trading band. Digital tokens stabilised from a Wednesday plunge, victims of ebbing liquidity and evaporating demand for speculative assets.

US inflation moderated but topped expectations at 8.3%, signalling persistent price pressures. Traders raised bets the Fed will roll out another half-point interest-rate hike in September — following similar increases in June and July. Russia’s war in Ukraine and China’s Covid lockdowns are creating shortages and stoking costs.

For equities, ‘we’re seeing the beginning of the capitulation and the great reset, if you want, in pricing,’ Virginie Maisonneuve, global chief investment officer for equity at Allianz Global Investors UK, said on Bloomberg Television. Right now the big question is peak inflation.

Fed officials appear to be sticking with their approach of raising rates by a half point at each of their next two meetings. But Fed Bank of Atlanta President Raphael Bostic said he’s open to boosting borrowing costs to restrict economic growth if inflation persists at elevated levels.

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