Asian stocks lose ground as traders await US inflation data

Singapore — Asian stock markets slipped after making early gains on Tuesday, as investors waited for US inflation data that many hope will persuade the Federal Reserve and other central banks to step back from aggressive interest rate hikes.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.10% in midday trade while Japan’s Nikkei and Australian shares were 0.35% and 0.24% higher respectively. Seoul’s Kopsi index was down 0.10%.

China’s CSI300 index and the Shanghai Composite index fell 0.33% and 0.21% respectively as a fears of a surge in Covid-19 infections after the dismantling of key parts of government’s zero-Covid policy clouded the outlook for the world’s second-biggest economy.

But a tourism-linked index jumped more than 2% as Hong Kong eased Covid-19 restrictions for inbound travellers.

Beyond China, investors’ main focus was on US inflation data due out at 1.30pm GMT on Tuesday, with core consumer inflation expected to slow from 6.3% to 6.1% and headline inflation dropping to 7.3%.

Treasury secretary Janet Yellen struck a cautious note on Sunday, saying she expected a substantial slowdown in 2023 inflation, but that the US economy remained prone to shocks.

Later this week, the Fed, European Central Bank (ECB) and the Bank of England (BoE) are all expected to raise rates by 50 basis points (bps), rather than the aggressive 75bps hikes they went with earlier in the year.

“Given the very close proximity [of US consumer price index data] to the FOMC [Federal open market committee], it clearly has the ability to change the tone of the message … but is highly unlikely to change the headline 50bps hike,” Deutsche Bank said in a research note.

The dollar index, which measures the greenback’s value against six major currencies, was flat at 105.01.

Oil prices rose further after jumping on Monday due to supply jitters, with Brent crude futures up 1.17% at $78.90 a barrel and US West Texas Intermediate crude up 1.15% at $73.99 a barrel.

Spot gold hovered around $1,781.50/oz, while US gold futures were up 0.01% at $1,792.5.

Reuters