Asian stocks fell worldwide after fears of a sharp tightening of central bank monetary policy and reached the worst day on Wall Street in nearly five months.
Japan led Asian markets to fall on Wednesday morning, with Topix down 2.6 percent, while Australia’s benchmark S&P / ASX 200 fell 1.8 percent and Hong Kong’s Hang Seng index and China’s CSI 300 fell nearly 1 percent in morning trading.
Policymakers at the US Federal Reserve and the Bank of England have hinted that equity market sell-offs could come sooner than expected due to rising inflation.
The prospect of rapid tightening sent yields, which, in the opposite direction of bond prices, increased higher. Yields on 10-year U.S. Treasury bonds jumped 0.2 percentage points last week, encouraging further sales of equities. The S&P 500 closed 2 percent lower on Tuesday, the worst one-day fall since May, when the technology-focused Nasdaq Composite Index fell 2.8 percent.
The Fed said last week that it could cut its $ 120bn-a-month asset purchases, and half of its board members expected interest rates to rise in 2022. The Bank of England then issued a warning that inflation in the UK could peak at 4 per cent next year.
“It doesn’t seem like a really favorable background,” said Robert Cornell, ING’s Asia-Pacific head of research. Has shaken the global market.
The yen continued its slide against the U.S. dollar on Wednesday, with the Japanese currency briefly touching its March 2020 low after falling nearly 2 percent from last week.
The yen reached 1111.68 US dollars amid political uncertainty surrounding the election of Japan’s new prime minister by members of the ruling Liberal Democratic Party.
Traders said it was difficult to see a breakdown on either side of the currency until the results were known, adding that the yen was acting as a dual barometer of U.S. production and rising sentiment on commodity prices.
Shusuk Yamada, chief Japan equity and FX strategist at Japan, said higher U.S. production would attract steady-income investment flows from Japan. Meanwhile, Japan’s August trade deficit was a sign of the country’s sensitivity to high-value imports.
Rising global commodity prices have raised concerns about inflation. Brent, the international benchmark, rose above 80 80 on Tuesday for the first time since October 2018, as rising natural gas prices prompted countries to look elsewhere for their energy needs.
Oil prices fell in Asian trading on Wednesday and Brent fell nearly 1 percent to 78 78.19 a barrel.