Asian stock markets followed Wall Street lower for a second day Thursday after unexpectedly strong U.S. consumer price increases fueled worries inflation might drag on an economic recovery.
Market benchmarks in Shanghai, Tokyo, Hong Kong and Southeast Asia retreated.
Overnight, Wall Street’s benchmark S&P 500 index recorded its biggest one-day drop since February after consumer prices rose in April at their fastest year-on-year pace since 2008.
Rising prices reflect growing industrial and consumer activity after last year’s global shutdown to fight the coronavirus pandemic. But investors worry surging inflation might disrupt the recovery or prompt central banks to withdraw stimulus and near-zero interest rates.
The market reaction was “mild, reflecting the belief that this jump in inflation will eventually calm,” Tai Hui of JP Morgan Asset Management said in a report.
The Federal Reserve says this surge should be temporary, but “if inflation does not calm,” the challenge to the U.S. central bank’s credibility “could be disruptive,” Hui said.
The Shanghai Composite Index fell 0.6% to 3,441.37 and the Nikkei 225 in Tokyo tumbled 1.8% to 28,628.73. The Hang Seng in Hong Kong lost 0.8% to 28,010.86.
The Kospi in Seoul sank 0.1% to 3,158.88 and Sydney’s S&P-ASX 200 was 0.4% lower at 7,018.00. New Zealand also retreated.
On Wall Street, the S&P 500 lost 2.1% to 4,063.04. The Dow Jones Industrial Average lost 2% to 33,587.66 in its biggest decline since January. The Nasdaq gave up 2.7% in its largest pullback since March.
Apple, Microsoft and Amazon all fell more than 2%. Tesla fell 4.4%, bringing its pullback this month to nearly 17%.
Bond yields, or the difference between market price and the payout at maturity, snapped higher as prices fell. Bond prices fall if investors worry the value of that payout will be eroded by higher inflation.
The yield on the 10-year Treasury note rose to 1.69% from Tuesday’s 1.62%, a big move.
In energy markets, benchmark U.S. crude fell 46 cents to $65.62 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 80 cents on Wednesday to $66.08. Brent crude, used to price international oils, sank 53 cents to $68.79 per barrel in London. It rose 77 cents the previous session to $69.32 a barrel.
The dollar gained to 109.67 yen from Wednesday’s 109.60 yen. The euro edged up to $1.2083 from $1.2080.