BEIJING, Feb. 15 (AP) Asian stocks fell on Wednesday after U.S. inflation edged lower than expected, fueling concerns that the Federal Reserve may see the need to raise interest rates further.
Tokyo, Shanghai, Hong Kong and Sydney fell. Oil prices retreated.
Wall Street ended mixed on Tuesday after inflation slowed to 6.4% in January from 6.5% the previous month. That was below the three-decade high of 9.1% set in June, but above the consensus estimate of 6.2%.
Core inflation, which strips out volatile food and energy prices to provide a clearer picture of trends, rose to 0.4 percent a month earlier from 0.3 percent in December.
“Deflationary trends are at risk, which could prompt the Fed to raise rates further and keep rates higher for longer,” Oanda’s Edward Moya said in a note.
The Shanghai Composite fell 0.3 percent to 3,282.60 and Tokyo’s Nikkei 225 lost 0.5 percent to 27,476.75. Hong Kong’s Hang Seng index fell 1.3 percent to 20,840.78 points.
Seoul’s Kospi fell 1.4 percent to 2,430.57, while Sydney’s S&P-ASX 200 fell 1 percent to 7,356.80.
India’s Sensex opened down less than 0.1 percent at 61,022.03. New Zealand and Jakarta rose, while Singapore and Bangkok fell.
Shares have swung between gains and losses over the past year as traders try to figure out how far the Federal Reserve and other central banks will go to curb soaring inflation. Some fear they may be willing to plunge the global economy into recession.
Traders expect two more U.S. interest rates this year, each of 0.25 percentage points each, to slow business activity and hiring. While Chairman Jerome Powell and other Fed officials have said borrowing costs may have to remain high for an extended period of time to get inflation to the 2 percent target, some expect rate cuts to begin as early as the end of the year.
If inflation stays above 5.5 percent, that “puts us on track for four to six Fed hikes,” ACY Securities’ Clifford Bennett said in a note.
“Further curtailment of consumer and business investment is certain,” Bennett said.
On Wall Street, the benchmark S&P 500 edged down less than 0.1 percent to 4,136.13. The Dow Jones Industrial Average fell 0.5 percent to 34,089.27 and the Nasdaq added 0.6 percent to 11,960.15.
The Fed’s benchmark lending rate is 4.50% to 4.75%, up from near zero a year ago.
Investors have been raising their forecasts for how high the Fed will reach by summer, and they are now betting on a 19.2% chance that its key rate will exceed 5.5% in July. That’s up from a 0.2% chance a month ago, according to the CME Group.
Market expectations of the Fed have been driving yields higher in the bond market. The two-year Treasury note has risen to its highest level since November, and last week’s U.S. labor market report was stronger than expected.
The two-year yield rose to 4.61% from 4.52% late on Monday. It initially zigzags up, down and back down after the inflation report is released.
The yield on the 10-year Treasury note, which helps set rates on mortgages and other lending, rose to 3.75% from 3.70%.
In energy markets, benchmark U.S. crude fell 68 cents to $78.38 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.08 to $79.06 on Tuesday. Brent crude, the price basis for international oil trades, fell 73 cents to $84.85 a barrel in London. It fell $1.03 to $85.58 in the previous session.
The dollar rose to 133.11 yen from 133.06 yen on Tuesday. The euro fell to $1.0718 from $1.0739. (Associated Press)
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