Hong Kong: As inflation in the United States has soared to a record high, which has intensified people’s concerns that the Fed will be forced to tighten monetary policy sooner or later, Asian stock markets fell mostly on Monday after Wall Street rebounded again.
Reports that President Joe Biden is considering a new trade investigation into China have exacerbated the pessimism and offset the optimism triggered by the news that he held talks with Xi Jinping on Friday to ease relations between the superpowers.
After pushing Asia’s healthy gains so far this month, Friday’s data once again disrupted investor sentiment. The data showed that due to the surge in demand, the US factory gate inflation rate soared to a record high of 8.3% in August due to supply and labor shortages.
This interpretation intensified speculation about the Fed’s monetary policy plan.
Its president, Jerome Powell (Jerome Powell) has stated that the central bank may begin to scale back its massive bond purchase program before the end of the year—a key driver of economic and stock market recovery.
But the latest data may prompt officials to set a timetable in advance. The consumer inflation data released on Tuesday now has more significance.
On Friday, the three major U.S. stock indexes closed down, and reports from the Biden survey increased selling pressure.
According to the report, the president is said to be studying Beijing’s subsidies and their impact on the U.S. economy, as well as discussing the trade agreement that Donald Trump agreed to last year.
According to Rodrigo Catril of National Australia Bank, “Although initial market transactions are active, it is hoped that the resumption of high-level dialogue may eventually lead to a reduction in China’s tariffs,” but the news about the investigation “has produced the opposite result.”
“While initially markets traded positively on the hopes that a restart in high-level dialogue might eventually lead to a reduction in Chinese tariffs,” news about the investigation “delivered the opposite outcome”, said National Australia Bank’s Rodrigo Catril.
“That said, it is unclear when the White House will announce the outcome of its review and as we know from the Trump era, any action against China is likely to come with retaliations.”
Hong Kong led the losses, with tech firms again taking much of the heat on lingering concerns about China’s crackdown on the sector, while Tokyo, Singapore, Seoul, Taipei, Manila and Jakarta were also down.
However, there were small gains in Sydney, Shanghai and Wellington.
“Risk assets will continue to struggle in the near term with weak hard data due to the Delta (coronavirus) outbreak and supply disruptions over the summer,” Barclays strategists including Shinichiro Kadota said.
Traders are also keeping tabs on the Korean peninsula after the North test-fired a new “long-range cruise missile” over the weekend, calling it a “strategic weapon of great significance”.
The US military described the move as posting “threats” to the country’s neighbours and beyond.