Asian stocks fell on Thursday after inflation U.S. inflation strengthen the case for aggressive monetary tightening.
Share in Mainland China trading higher while Hong Kong, South Korea and Japan dipped. The MSCI Asian Index ex Japan is trading higher by 0.37%.
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.
US inflation moderated but topped expectations at 8.3%, signaling persistent price pressures. Traders are now betting that the Fed in September will hike rate by another half-point.
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.
“Until we get a meaningful move lower in inflation, not only one print, but a consistent two, three, four prints moving in the right direction, this market may remain range bound,” Mona Mahajan, senior investment strategist at Edward Jones & Co., said on Bloomberg Television.
Crude oil dipped with the WTI trading around $104 a barrel while the Brent is trading around $106 a barrel.
