Asian Shares Fell – Oil Boosts Inflation
Stocks are suspended – Asian shares fell on Wednesday amid concerns about the solvency of Chinese real estate developers. Rising oil prices have sparked fears. The hot US inflation rate may put pressure on politicians to raise rates.
US and Brent crude oil futures rose in the fourth session and reached a two-week high of $85 a barrel. Another warning comes from the prices of Chinese factory gates, which are growing very fast.
S&P 500 futures fell 0.4%. The FTSE and European futures lost 0.2%. US inflation rates expect to show a 5.8% rise in consumer prices at 1330 GMT. Compared to the same period last year, this is the fastest pace. Even Federal Reserve officials have acknowledged that the pace is more progressive than previously thought.
According to Rob Carnell, an economist at ING, it is unlikely that anyone will feel comfortable with these inflation rates. Inflation is higher than expected, so this is what the market needs to take into account today. Before the data release, US stocks ended a long series of gains with a modest drop on Tuesday. On Wednesday, MSCI’s broadest Asia-Pacific stock index, outside Japan, fell 0.6%. Japanese Nikkei fell by 0.5%.
Treasuries have risen in recent sessions and flattened the yield curve. Investors are betting on a rise next year or expect modest growth in the coming years. The price of the treasury fell slightly in Asian hours, bringing the benchmark 10-year yield to 1.4626% by about two basis points. This is after reaching a six-week low of 1.4150% on Tuesday. Currency markets were relatively quiet. However, on Tuesday, traders advocated for safe-havens. As a result, the yen rose to a maximum of one month.
Suspended Stocks and Fears
The Japanese currency was at $112.84 on Wednesday. Risk-sensitive currencies, such as the Australian dollar, have come under pressure. The Australian exchange rate fell to $0.7366 from the 50-day moving average. According to Chris Weston, the dollar will be sensitive to the movement of the US Treasury curve in 2-5 years.
Investors are also experiencing a slowdown in China. Mainly because of the credit crunch, the real estate industry is spreading rapidly.
Sector bonds fell sharply. Shares of developer Fantasia Holdings were halved on Wednesday after returning from a six-week trading break. The reason for this is the company’s warning, according to which it may not fulfill the imposed obligations. The fuzzy outlook for demand boosted iron ore sales in banks to a 19-month low, while Hong Kong Hang Seng real estate shares fell to a one-month low of 1%. Analysts say the market is now ruled by more fear than prudence.
The Latest Data
A survey conducted in Japan showed that manufacturers’ confidence fell to a seven-month low. Tesla stock, which is an indicator of retail investor sentiment, has been the subject of fluctuations. The automaker suffered its sharpest drop in stocks in 14 months on Tuesday due to low pandemic levels. Traders are preparing for the possible sale of the head of the company. The primary beneficiaries of market turbulence are gold and bitcoin. Gold rose about 3.5% to $1,826 an ounce. Bitcoin was hovering at $66,400 after breaking the $68,564 record the day before.
China Inflation
Inflation at the Chinese factory gate reached a 26-year high in October. Coal prices have risen amid declining electricity in the country’s industrial center. This further reduced the profit margin for producers and exacerbated concerns about stagflation. According to the NBS, PPI increased by 13.5% compared to the previous year. This growth is faster than the 10.7% growth in September.
Accelerated consumer price growth also accelerated, albeit at a slower pace. CPI in October increased by 1.5% compared to the same period last year.
