Asian stocks fall as investors fret over inflation

BEIJING HONG KONG Asian stocks followed a steep Wall Street selloff on Thursday, as investors fretted over rising global inflation, China's zero-COVID policy and Ukraine war, while the safe-haven dollar held most of its strong overnight gains.

The first daily decline in a week was caused by MSCI's broadest index of Asia-Pacific shares outside Japan falling 2 per cent in early Asian trading hours. Japan's Nikkei fell by 2.4 per cent.

It was lower by 1.5 per cent loss for Australia's resource-heavy index, a 2.6 per cent drop in Hong Kong stocks and a 1 per cent retreat for blue chips in mainland China, as well as a 2.6 per cent loss for Australia's resource-heavy index. Overnight on Wall Street, earnings from retail giants soured sentiment, with Target Corp warning of a bigger margin hit due to rising fuel and freight costs as it reported its quarterly profit had halved. Walmart Inc warned of similar margin squeezes a day earlier in the day.

Target's shares plunged 24.88 per cent, the biggest drop since the Black Monday stock market crash on October 19, 1987. The Nasdaq fell almost 5 per cent on Wednesday, while the S&P 500 lost 4 per cent.

The concern for inflation has never gone away since we started in 2022, but they seem to be heading in the direction of 'out of control', despite the fact that things haven't reached the point of no return. The dollar was easing 0.0 per cent against a basket of major currencies on Thursday, with the dollar easing 0.05 per cent as it rallied on falling risk appetite. The Japanese yen was down 0.2 per cent against the dollar on the other hand.

Bilal Hafeez, CEO of London-based research firm MacroHive, said there was a bias towards safe-haven assets right now, particularly cash.

There may be short-term bounces in equities like the last few days, but the big picture is that the era of low yields is over, and we are transitioning to a higher rates environment, said Hafeez, spokeswoman for the Reuters Global Markets Forum. This will pressure the markets that have benefited from low yields. The yield on benchmark 10 year Treasury notes was 2.8931 per cent, as the U.S. Treasuries rallied overnight and were steady in Asia.

The two-year yield, which has risen with traders' expectations of higher Fed fund rates, was at 2.6715 per cent compared with a U.S. close of 2.667 per cent.

On Thursday morning, oil futures were mixed. U.S. crude fell 0.2 per cent to $109.38 a barrel. Brent crude rose by 0.26 per cent to $109.4 per barrel.

The spot price was slightly lower with gold falling to $1,814. Per ounce, it was 8899.