Asian stock markets fell following declines across the board in the US as inflation and growth concerns sapped risk sentiment.

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Benchmark indexes all slipped at the open in Japan, South Korea and Australia. Futures for equities in Hong Kong were also lower. The moves came after the S&P 500, tech-heavy Nasdaq 100 and the blue-chip Dow Jones Industrial Average had ended just off session lows on Tuesday. US futures were little changed in early Asia trading.

A late-day selloff pushed the S&P 500 below its average price over the last 50 days for the first time since March, halting a streak of momentum that was by this measure the longest since September 2020.

US stocks fell after retail sales came in above forecasts, bolstering the case for the Federal Reserve to raise interest rates higher for longer. That message was reinforced by Minneapolis Fed President Neel Kashkari, who said that while inflation has been coming down, “it’s still too high.”

Treasuries were little changed in early trading in Asia. In the wake of the sales data, yields on two-year notes briefly spiked above 5 percent, a level it hasn’t closed above since early March, before reversing course. Yields on the 10- and 30-year Treasuries rose to the highest levels since October.

“The Fed is really kind of wanting to get to 2 and our concern is that they may just not get there,” James Demmert, chief investment officer at Main Street Research, said on the central bank’s 2 percent inflation target this year on Bloomberg Television. “You can have a very robust economy and again, this is a very resilient one coming along with that kind of inflation figure.”

China’s economic woes remained in focus, with US-listed shares of Chinese companies falling for a third day. JPMorgan Chase & Co. lowered its full-year economic growth forecast for China to 4.8 percent from 5 percent after a raft of disappointing data for July. Separately, some analysts speculated China’s surprise rate cut on Tuesday may need further measures to revive confidence. Meanwhile, Macquarie Group lowered estimates for the yuan.

In currencies, the dollar steadied, while the yen hovered near its highest level since November.

Also a concern among investors is a warning from Fitch Ratings that the firm may downgrade larger lenders like JPMorgan or Bank of America Corp.

In Asia Wednesday, the Reserve Bank of New Zealand is likely to keep rates unchanged but send a hawkish signal to rein in elevated inflation expectations, according to Bloomberg Economics.

While investors navigate a hawkish Fed and a slowdown in China, a devaluation in Argentina and Russia’s emergency rate hike on Tuesday to stem the ruble’s slide added to the risk-off sentiment.

Still, Bank of America’s latest global survey of fund managers found investors the least pessimistic on stocks since February of last year, before the Fed began one of the most aggressive tightening cycles in decades.

They increasingly expect no recession at all within the next 18 months, and a “soft landing” in the next 12 months remains the base case, BofA strategists led by Michael Hartnett wrote in a note.

Meanwhile, retailer Home Depot Inc. beat the average analyst estimate. More insight into the state of the US consumers will come later this week when Target Corp. and Walmart Inc. are set to report.

On the economic front, the UK reports inflation and the Euro area posts growth figures. Later, minutes from the Fed’s July policy meeting are due.

Elsewhere, oil steadied after a two-day decline on signs of a tighter market. Gold was little changed.

Also Read: Trade Setup for August 16: Will inflation dampen any hopes of a Nifty 50 bounce?

First Published:Aug 16, 2023 6:23 AM IST