Asian markets skid after inflation report thumps Wall Street

Tokyo’s Nikkei 225
JP:NIK
fell 0.7% while the Hang Seng
HK:HSI
in Hong Kong lost 0.6%. The Kospi
KR:180721
in South Korea sank 0.7%

The Shanghai Composite index
CN:SHCOMP
gave up 0.2% and Australia’s S&P/ASX 200
AU:XJO
shed 0.8%. Stocks gained in Singapore
SG:STI,
but fell in Taiwan
TW:Y9999,
Malaysia
MY:FBMKLCI
and Indonesia
ID:JAKIDX.

Bangkok’s SET index
TH:SET
fell 0.2% after the government reported the economy grew at a meager 2.6% annual pace in 2022 and slowed more than expected in the last quarter of the year, to a 1.3% annual expansion, as a rebound in tourism failed to make up for weaker exports.

On Thursday, the Dow Jones Industrial Average
DJIA
lost 1.3% to 33,696.85, while the Nasdaq composite
COMP
dropped 1.8% to 11,855.83.

The S&P 500
SPX
ended at 4,090.41. A 2.7% fall for Microsoft
MSFT,
3.3% drop for Nvidia
NVDA
and 4.7% slide for Tesla
TSLA
were some of the heaviest weights on the benchmark index.

Stocks have been churning recently on worries that persistently high inflation will push the Federal Reserve to get even more aggressive on interest rates. Higher rates can drive down inflation but also drag on investment prices and raise the risk of a serious recession.

Such fears have been most clear in the bond market, where yields have leaped this month as traders raise their forecasts for how high the Fed will take interest rates.

Treasury yields rose Thursday as traders upped their bets for how high the Federal Reserve will raise interest rates to combat inflation. Higher rates hurt the economy and weigh on financial markets. Other data on the economy chipped away at hopes the Fed might wrestle inflation lower without causing a severe recession.

The yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 4.67% from less than 4.60% before the inflation report’s release and from less than 4.10% earlier this month. It’s near its highest level since November, when the yield reached levels last seen in 2007.

Thursday’s inflation report showed that prices at the wholesale level were 6% higher last month than a year earlier, slower than December’s rate but worse than expected. Perhaps more concerning was that inflation accelerated in January on a month-to-month basis even after stripping out prices for food, energy and other layers.

The inflation report thudded onto Wall Street along with a batch of other data painting a mixed picture of the economy.

Fewer workers applied for jobless benefits last week than expected, suggesting that layoffs remain low across the economy. That’s good news for workers and another signal of strength for the job market, but the Fed worries it could also add upward pressure on inflation.

Loretta Mester, president of the Federal Reserve Bank of Cleveland, said in a speech Thursday that she saw “a compelling economic case” at the Fed’s meeting earlier this month to raise rates by double what it did.

In other trading on Friday, U.S. benchmark crude
CLH23
oil lost 64 cents to $77.85 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude
BRNJ23,
the international pricing basis, gave up 68 cents to $84.46 per barrel.

The dollar
USDJPY
rose to 134.67 Japanese yen from 133.99 yen.