The Ministry of Labor said that the US consumer price index rose 0.9% in June
Asian stocks dropped on Wednesday as data showed the biggest rise in U.S. inflation in 13 years.
US bond yields and the dollar were low in Asian trade after a surge in inflation.
The Ministry of Labor said on Tuesday that the US consumer price index rose 0.9% in June. This exceeded market expectations and was the highest since June 2008.
Rob Kernel, Head of Research for ING’s Asia Pacific region, said: The only thing we come across as a slight ointment of all this is that no one seems to expect much about the Fed’s interest rates, so we may get faster, but less.
In New Zealand, the Reserve Bank of New Zealand (RBNZ) became the latest central bank on Wednesday to plan the end of pandemic policy. The market was surprised by the announcement that it will end its bond purchase program next week and raise the Kiwi dollar significantly.
MSCI’s widest non-Japanese Asia Pacific stocks declined 0.33%, China’s top-cap stocks dropped 1%, Hong Kong’s Hang Seng Index shed 0.66%, and Seoul’s KOSPI index lost 0.29%. The Australian bourse advanced 0.34% due to boosts from miners and energy companies. The Nikkei Stock Average in Japan shed 0.2%.
Investors are eyeing Fed Chairman Jerome Powell’s semi-annual testimony to Congress on Wednesday and Thursday to gain more clues as to whether the Fed will take more aggressive steps to halt inflation. Powell’s testimony comes from the Biden administration’s continued push for fiscal stimulus to boost the US economy.
Late Tuesday, Democrats from the US Senate Budget Committee reached an agreement on a $ 3.5 trillion infrastructure investment plan that they aim to include in a budget resolution to be discussed later this summer.
Meanwhile, in Asia, China will release second-quarter economic growth data Thursday, despite central banks being set to lower bank reserve requirements to boost an imbalanced economic recovery.
The Chinese prime minister said on Tuesday that the country would take “comprehensive measures” to keep economic activity within reasonable limits and mitigate rising commodity prices for the next 18 months.
Overnight on Wall Street, stocks first surged on CPI data, bidding on technology stocks that normally grow at low interest rates, but the major indices eventually dropped.
The Dow Jones Industrial Average shed 0.31% to 34,888.79, the S&P 500 lost 0.35% to 4,369.21, and the Nasdaq Composite Index dropped 0.38% to 14,677.65.
The $ 24 billion auction of 30-year Treasuries reflected investor anxiety as it was sold at a yield of 2.00%, more than two basis points higher than where the debt was traded prior to the auction.
Bond yields were pulled back on Wednesday after jumping over the curve the day before.
The 30-year yield dropped from a closing price of 2.037% to 2.0302%, while the benchmark 10-year yield dropped from a closing price of 1.415% on Tuesday to 1.3998%.
