Asian Stocks Fall Ahead of the U.S. Inflation

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Author: Valerie Roberts

Asian markets fell ahead of U.S. inflation data on Wednesday. Traders fear this would demonstrate that price pressure is  too high for the Federal Reserve to scale down interest rate prices.

U.S. Inflation Has Affected Asian Stocks Market

The benchmark S&P 500 index on Wall Street dropped 0.4% on Tuesday, marking its fourth consecutive day of loss.

The United States inflation rate is assumed to have decreased from June’s four-decade high of 9.1%. 

But according to a FactSet study, investors predict an increase in core inflation, excluding food and energy prices, leaving only rent and other expenses. That excludes other reports that indicate a slowdown in economic growth.

Will the Fed’s Inflation-Reduction Tactics Freeze the Economy?

According to Tan Boon Heng of Mizuho Bank, the Fed considers anything beyond 8% to be “still too high.” He also declared that the battle against inflation was far from ended.

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Investors are concerned that attempts by the Fed and other central banks in Europe and Asia to reduce the long-term high inflation rate might freeze global economic development. 

While traders seek confirmation of how rapidly the Fed may pursue additional rate hikes, the S&P 500 dropped to 4,122.47.

The Federal Reserve has increased interest rates four times this year, twice by 0.75 percentage points, which is triple the average increase. After the statistics released last week revealed hiring was higher than expected, investors anticipate another increase of 0.75 percentage points in September.

Although some refer to the robust employment market as proof that the U.S. economy can withstand additional rate rises, some financial professionals predicted the economy might enter a recession.

What Sectors Have Suffered?

The Dow fell 0.2% to close at 32,774.41. The Nasdaq ended down 1.2% to 12,493.93. The Russell 2000 dropped 1.5% to 1,912.89.

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After informing investors that sales might fall short of expectations due to declining demand, chipmaker Micron Technology saw a 3.7% decline. 

This warning severely impacted other chipmakers; Nvidia’s stock dropped 4%. Following the release of dismal financial results and an unsatisfactory revenue outlook, Norwegian Cruise Line had the highest decline in the S&P 500, falling 10.6%. Expedia lost 1.6% of its value, while American Airlines lost 2.7%.

Aside from China’s anti-virus efforts, which interrupted commerce and industry, and prompted a surge in the price of oil, wheat, and other commodities, Russia’s vs. Ukraine war also produced market instability.

The New York Mercantile Exchange’s electronic trading saw benchmark U.S. crude drop 30 cents to $90.2/barrel in the energy sector. 

On Tuesday, the contract dropped 26 cents to $90.50. Brent crude, the benchmark price for global trade, dropped 25 cents to $96.06 a barrel in London. 

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The previous session saw a decrease of 34 cents to $96.31.

From Tuesday’s 135.18 yen, the dollar dropped to 135.02 yen. The euro rose to $1.0215 from $1.0205.

Conclusion

Asian stocks fell sharply Thursday after data showed U.S. inflation unexpectedly rose last month, adding pressure on the Federal Reserve to raise interest rates faster than expected. The Fed has indicated that it plans to raise interest rates three times next year. Investors fear higher borrowing costs will slow economic growth and hurt corporate profits.

 

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