Asian shares fall on US inflation jitters

SHANGHAI: Asian shares fell on Wednesday after data showing the biggest jump in US inflation in 13 years fuelled some market expectations that the Federal Reserve could exit pandemic-era stimulus earlier than previously thought. But US bond yields and the dollar were lower in Asian trade after jumping a day earlier on the inflation data.

The US consumer price index jumped 0.9 per cent in June, the Labor Department said on Tuesday. That was above market expectations and the largest gain since June 2008, according to Reuters.

“Against the background of higher, longer US inflation, a taper coming earlier seems to be the likely direction of travel as far as policy goes,” said Rob Carnell, ING’s Asia-Pacific head of research.

“The only thing that comes across as a slight salve in all of this is that no one seems to be expecting much in terms of Fed rates. So we might be getting sooner, but we’re not getting very much.”

The Reserve Bank of New Zealand (RBNZ) on Wednesday became the latest central bank to plot an end to the pandemic-era policy, as it surprised markets by announcing it would end its bond purchase programme from next week, sending the Kiwi dollar sharply higher.

Asia-Pacific shares

MSCI’s broadest index of AsiaPacific shares outside Japan fell 0.33 per cent, as Chinese bluechips dipped 1 per cent, Hong Kong’s Hang Seng slipped 0.66 per cent and Seoul’s Kospi lost 0.29 per cent.

Australian shares were 0.34 per cent higher on a boost from miners and energy firms.

Japan’s Nikkei was down 0.2 per cent.

Investors are keeping a close eye on the semi-annual testimony of Fed Chair Jerome Powell to Congress on Wednesday and Thursday for more clues on whether the Fed will take more aggressive steps to halt rising inflation. Powell’s testimony comes as the Biden administration continues to push for fiscal stimulus to boost the US economy.

Democrats on the US Senate Budget Committee late on Tuesday reached an agreement on a $3.5 trillion infrastructure investment plan that they aim to include in a budget resolution to be debated later this summer.

Meanwhile, in Asia, China is due to release second-quarter economic growth data on Thursday even as its central bank is set to cut banks’ reserve requirements to help bolster an unbalanced economic recovery.

China’s premier said on Tuesday that the country will keep its economic operations within a reasonable range over the next 18 months and take “comprehensive measures” to ease rising commodity prices.

On Wall Street overnight, stocks at first took the CPI data in stride, bidding up technology stocks that typically thrive with low-interest rates, but major indexes ultimately closed lower.