Asian stocks down as Ukraine fears offset inflation hopes

Asian stocks mostly fell Wednesday as another positive US inflation report that fanned hopes of a slowdown in the Fed's rate hike campaign was offset by fresh geopolitical concerns over Ukraine and profit-taking.

World markets have rallied since last week after data showed US consumer prices rose much less than expected in October, suggesting months of monetary tightening by the Federal Reserve was kicking in.

The news was followed Tuesday by a below-forecast reading on wholesale prices, providing extra room for the central bank to take its foot off the pedal when raising borrowing costs and possibly easing pressure on the economy.

Still, central banks' tough battle against inflation was highlighted Wednesday by data showing UK prices rose more than 11 percent last month, a fresh four-decade high.

The optimism had been further enhanced by China's pledge to provide much-needed support to the country's beleaguered property sector as well as ease some of the strict Covid-19 restrictions that have played a major role in dragging the economy down.

However, the positive mood that had flowed through markets was dealt a blow after Poland said a missile"most probably Russian-made"-had struck a village in the country's east, killing two people.

Warsaw put its military on alert and US President Joe Biden and other

Western leaders met in an "emergency roundtable" Wednesday on the sidelines of the G20 summit in Indonesia.

The news sparked fears that if it was proved to be an attack on Poland, a NATO member, the nine-month war in Ukraine could escalate.

Biden told reporters that allies would support Poland in probing "exactly what happened" but that preliminary information showed it was probably not fired "from Russia".

And France urged "utmost caution" on the origin of the missile.

The comments helped ease concern on trading floors, though profittaking after three days of healthy gains weighed on buying sentiment.

Tokyo, Singapore and Mumbai edged up but Hong Kong fell after surging about 14 percent over the previous three days. There were also losses in Shanghai, Sydney, Seoul, Wellington, Manila, Bangkok, Jakarta and Taipei.

"Even if the missiles that crossed the Polish border were indeed deemed Russian and not Ukrainian anti-missile interceptors, the case would fall short of triggering an escalation at this point," said SPI Asset Management's Stephen Innes

"Hence the markets are deferring to a wartime mistake, believing this to be a case of misfire." Still, he added: "While the market is not in full risk-off mode while deferring to a wartime mistake, the risk of a NATO-Russia clash is growing and real."

On currency markets, the dollar also saw sharp swings against its peers in reaction to the news out of Poland, while oil slipped after initially spiking on reports of the strike.

"The stock market had a nice, little run leading up to election day based on the gridlock angle," said Patrick O'Hare at Briefing.com. "It appears that is going to be the case, so participants are taking some money off the table," he added. Investors also took note of the continued slide of Bitcoin which tumbled on fallout from the near-collapse of cryptocurrency platform FTX, reaching a low at $16,034.70.

Binance, the world's biggest cryptocurrency platform, announced it was ending plans to acquire rival FTX.com a day after disclosing it signed a nonbinding letter of intent to buy FTX.

"Even if you are not involved in cryptos, the turmoil is definitely something to keep an eye on, as it may be an additional factor impacting risk appetite across the financial markets," said market analyst Fawad Razaqzada at City Index and FOREX.com.

The Dow Jones Industrial Average fell by nearly two percent, while the broad-based S&P 500 lost 2.1 percent lower and the tech-rich Nasdaq Composite Index slumped as well.

But the dollar rose strongly against the British pound, which has been under pressure owing to the UK's bleak economic outlook.

Oil prices dipped as well, as official data from China showed the world's second-largest economy languishing under its strict zero-Covid policy, and US stockpiles increased.