Hong Kong: Asian markets were mixed on Wednesday. Investors are waiting for key US inflation data, which may play an important role in the Fed’s plan to tighten monetary policy, and concerns about global energy tightening have also made nerves nervous.
As the world’s largest economy embarks on a recovery track, the U.S. central bank has stated that it will begin to withdraw the large-scale financial support provided at the beginning of the pandemic.
But in recent months, supply chain bottlenecks, reopening, and soaring fuel costs have driven demand surges that have led to a surge in inflation, putting pressure on bank governors to take action to prevent prices from getting out of control.
Long-term above-target inflation has increased expectations that the Fed will have to raise interest rates after ending its large-scale bond purchase program.
Some analysts now say that the first rate hike may occur as early as mid-2022, much earlier than early 2023 as initially predicted.
The prospect of rising borrowing costs has hindered the global market’s rebound that has been going on for about a year and a half.
The upcoming earnings season is also receiving much attention to understand the impact of trade bottlenecks and rising inflation on company profits, especially the forecast for the fourth quarter.
“There’s real damage that’s potentially lurking from the supply chain issues,” said John Kilduff of Again Capital. “It’s a real potential negative for the global economy.”
Wall Street’s three main indexes provided a tepid lead, and Asia struggled for direction.
Tokyo, Sydney and Taipei edged down, though there were gains in Seoul, Singapore, Manila, Jakarta and Wellington.
Shanghai was also in the red ahead of Thursday’s release of China’s own inflation readings, with prices in the world’s number two economy also sharply higher.
Oil prices edged down having rallied to multi-year peaks on surging demand, with analysts suggesting hopes for talks between world powers and Iran on the country’s nuclear programme provided some respite.
A deal could allow Tehran to start exporting crude globally again, easing some pressure on supplies ahead of the approaching northern hemisphere winter.
Limited stockpiles and the reopening of economies have sent prices of oil and other fuels soaring, raising concerns about the impact on the global economic recovery.
Meanwhile, Democrats’ suggestions that they could pare back US President Joe Biden’s multi-trillion-dollar infrastructure and social care proposals have lifted optimism they could get the bills through Congress.
“Risks to the outlook are rising and Democrats know they are running out of time,” said OANDA’s Edward Moya.
“Progressives and moderates don’t want to be responsible for disrupting Biden’s economic agenda, so it looks like some major concessions will be made shortly.”