Inflation and oil price concerns are weighing on Asia's stock markets.
By: Asia Business Outlook Team | Wednesday, 24 November 2021
TOKYO, Japan (A.P.) — The Concerns about inflation sparked a sell-off in Asian stocks on Wednesday, fueling speculation that the U.S. Federal Reserve will raise interest rates.
Following a national holiday on Tuesday, Japan's Nikkei 225 index fell 1.1 percent to 29,436.73 in early trading. The Kospi index in South Korea fell 0.3 percent to 2,988.40. The S&P/ASX 200 index in Australia fell nearly 0.1 percent to 7,403.30. The Hang Seng in Hong Kong fell 0.3 percent to 24,588.48 points, while the Shanghai Composite dropped 0.4 percent to 3,575.93 points.
"Markets continue to shift their expectations toward a tighter Fed monetary policy," said I.G. market strategist Yeap Jun Rong, who added that investors will be watching for U.S. data later in the day.
To combat inflation, some Asian central banks have already begun to raise interest rates. New Zealand elevated its benchmark interest rate by 0.25 percent to 0.75 percent on Wednesday.
The Reserve Bank raised it from a record low of 0.25 percent to 0.5 percent in October, the first such increase in more than seven years, removing some of the support it provided when the coronavirus pandemic began.
Later that day, the Fed will release minutes from its October policy meeting, potentially providing investors with more information on the central bank's plan to begin reducing bond purchases that have helped keep interest rates low.
Wall Street ended a shaky trading day with gains in banks and energy companies offsetting losses elsewhere in the market. The S& P 500 managed to gain 0.2 percent to 4,690.70 after fluctuating between small gains and losses for much of the day.
The Dow Jones Industrial mediocre rose 0.5 percent to 35,813.80, while the Nasdaq Composite fell 0.5 percent to 15,775.14. Small-company stocks have also fallen in value. The Russell 2000 index fell 0.1 percent to 2,327.86.
Over 60% of the S& P 500's stocks increased. Gains in banks, energy stocks, and household goods companies were offset by losses in technology and communication stocks, as well as a mix of consumer-facing companies.
Retailers were divided as the holiday shopping season got underway. Dollar Tree gained 9.2 percent, the most among S& P 500 companies. Starbucks increased by 1.9%. Best Buy fell 12.3 percent, the most in the S& P 500, as worries about shrinking margins outweighed solid earnings.
Companies in technology and communications also had an impact on the overall market. Adobe fell 1.3 percent, while Intel fell 1.5 percent.
The next day, zoom Video fell 14.7 percent after the video conferencing company reported slowing third-quarter revenue growth.
The 10-year U.S. Treasury yield increased to 1.68 percent from 1.63 percent late Monday but fell to 1.65 percent by midday Wednesday in Asia.
On Tuesday, the price of U.S. crude oil increased by 2.3 percent. In comparison, wholesale gasoline increased by 3.4 percent after President Joe Biden ordered the release of 50 million barrels of oil from the nation's strategic reserve to help reduce energy costs. The decision was made in collaboration with other major oil-consuming countries, including Japan.
Although Japan's comprehensive data has not revealed an inflation problem on the scale of other countries, critics argue that it is just not as evident in sectors hit by soaring energy prices, from businesses that rely on fuel to plastic bags, which are a petroleum product.
The release of oil reserves may not necessarily lower oil prices, but analysts believe it may send a message to OPEC.
In the energy market, benchmark U.S. crude rose 5 cents to $78.55 per barrel. Brent crude, the international benchmark, was down 21 cents to $81.12 per barrel.
Stocks are expected to trade in a more volatile manner this week, with U.S. markets closed on Thursday for Thanksgiving and then closing early on Friday.
On Wednesday, Wall Street will receive a few pieces of economic data that may provide investors with a better sense of the pace and breadth of the economic recovery. The Labor Department will subject its weekly report on unemployment benefits. The Commerce Department releases third-quarter GDP data as well as its new home sales report for October.
In currency trading, the U.S. dollar fell to 115.09 Japanese yen from 115.15 yen. The euro now costs $1.1236, down from $1.1249.