Asian stock markets fell on Wednesday as investors braced for the latest U.S. inflation data, which is expected to shape the pace of future monetary tightening by the Federal Reserve.
Hong Kong’s Hang Seng index lost as much as 2.2%, while China’s benchmark CSI 300 index of stocks listed in Shanghai and Shenzhen fell as much as 1%. Japan’s Topix fell 0.3%.
Consumer price index inflation in the United States reached 9.1% in June, the highest level in 40 years, which the central bank reached with consecutive increases in interest rates of 0.75 percentage points.
Economists expect monthly headline inflation of 0.2% and an annual rate of 8.7%. Markets are pricing in the possibility of another 0.75 percentage point hike at the Fed’s next monetary policy meeting in September.
In government bond markets, the yield on the two-year US Treasury note, which moves with interest rate expectations, fell 0.02 percentage points to 3.27%. The yield on the 10-year note, which moves with inflation and growth expectations, edged down 0.01% to 2.79%. Yields move inversely to bond prices.
“Market attention has alternated between slowing growth and overly high inflation,” the Citi analysts wrote, adding that a stronger inflation reading “will get the market thinking – and perhaps Fed officials – 100%. [basis point] rise or a 75 bp rise in September followed by another in November”.
Wednesday’s market moves followed the release of Chinese inflation data, which showed consumer prices rose 2.7% year on year in July, less than expected, and 0.5% compared to the previous month.
The tech sector led the stock slide, with the Hang Seng Tech index dropping as much as 3.1%. The biggest declines were recorded by electric car makers Nio, Xpeng and Li Auto, which lost as much as 7.2%, 6.6% and 6.9%, respectively.
Oil prices edged lower on Wednesday, with international benchmark Brent shedding 0.3% to trade at $96.01 a barrel and U.S. marker West Texas Intermediate down 0.4% at $90.16.