Investing.com – Most Asian shares fell on Thursday, tracking overnight declines on Wall Street after higher-than-expected U.S. inflation undercut bets that the Federal Reserve will cut interest rates early.
Inflation data from China also showed Asia’s largest economy remains in a persistent deflationary trend, further dampening sentiment.
Wall Street indexes fell in overnight trading after stronger-than-expected inflation data (CPI) prompted traders to largely abandon bets on a June Fed rate cut.
US stock index futures fell in Asian trading.
Chinese stocks fall after consumer price index fell more than expected in March
Weak inflation data from China also jolted regional markets. China’s indexes and indices fell 0.2% and 0.4% respectively after data showed the economy contracted more than expected in March.
The sustained decline also points to little sign of economic recovery in China, which has struggled with persistent deflationary trends over the past year.
China’s weakness bodes poorly for Asian economies as a whole, given that they rely on the country as a major trading partner.
Losses in mainland Chinese stocks sent Hong Kong’s index down 1.4%, erasing much of Wednesday’s gains amid a rally in technology stocks.
Australian shares fell 0.8% as recent gains in commodity prices provided limited gains for mining stocks. Concerns about China have also weighed on Australian shares, given their heavy exposure to mainland China.
Japan’s index fell 0.6% and lost 0.3%. Big losses in Japanese stocks were capped by gains in shares of major exporters as they fell to 34-year lows.
However, uncertainty over potential government intervention to support the yen also dampened sentiment on Japanese markets.
South Korean shares fell 0.4% and Indian markets were closed for a holiday. However, the price hit a record high on Wednesday.
June rate cut bets disappear
Other Asian markets also retreated on Thursday on the prospect of US interest rate hikes and extensions.
Sentiment towards risk-on markets was largely dampened by strong US CPI data. These data, combined with a hawkish outlook, led markets to lower expectations for a 25 basis point rate cut in June. The minutes showed that even before the release of the hot CPI readings for March, Fed officials were already concerned about persistent inflation.
The markets shown now place the probability of the rate being maintained in June at over 80% and the probability of a rate cut at 17.5%.