Asian stocks choked by inflation, worries about China

© Reuters. FILE PHOTO: A man in a protective mask walks past an electronic board displaying the Shanghai Composite Index, Nikkei Index, and Dow Jones Industrial Average during the coronavirus disease (COVID-19) outbreak outside a real estate agency in Tokyo, Japan, March 7.

By Scott Murdoch

HONG KONG (Reuters) – Asian stocks weakened Monday as investors feared inflation and rising interest rates would hamper the global economic outlook and the COVID-19 situation in China weighed on sentiment, hitting tech companies in particular.

MSCI’s widest index of Asia-Pacific stocks outside of Japan fell 0.3% as key markets in the region traded in the red. Oil rose and gold extended its recent gains.

However, the US and European markets appeared to shake off the gloomy Asian mood, with the pan region rising 1.35%, the German rising 1.4% and futures rising 0.83%. rose 1.04%.

Australian stocks reversed early gains and fell 0.13% on Monday, while the stock index bucked the regional trend and was up 0.7%.

A negative tone was evident as Hong Kong fell 1.27% and the mainland’s CSI300 index fell 0.7%, weighted by the technology sector. The Hang Seng Tech Index fell 2.2% and is down 26.5% so far this year.

“The sell-off in Asia is mainly driven by the negative global sentiment that currently exists,” Jack Siu, Credit Suisse’s chief investment officer in China, told Reuters.

China’s tech sector, he added, would remain volatile until regulatory clarity and US markets stabilize.

Daily COVID-19 numbers in China remain closely watched by investors and Beijing on Monday reported 99 new infections for the previous day, the largest daily number to date during a month-long outbreak.

The decline in China’s markets on Monday came after a surprisingly strong end to last week, when Hong Kong and mainland markets rose between nearly 2% and 3%.

There was net inflow of $2.13 billion into mainland equities from foreign investors on Friday, the highest in 2022, according to stock market data.

In foreign exchange, the , which tracks the greenback against a basket of currencies from other major trading partners, fell 0.35% to 102.63.

The benchmark 10-year Treasury yield rose to 2.8207% from the US close of 2.787% on Friday.

The two-year yield, which is rising in line with traders’ expectations of higher Fed fund rates, came in at 2.6266%, from 2.583%.

Inflationary pressures remain a top priority for investors as German wholesale inflation data released Friday showed a higher-than-expected jump, indicating that prices will remain high in the near term.

In Australia, the Labor Party won the general election last weekend, ending a nearly ten-year rule by their conservative rivals.

While Labor has promised climate change, housing and strengthened social security reforms, analysts don’t believe the change in government will have a major impact on the economy.

“In our view, little has been suggested by the incoming government during the election campaign that we should revise our economic forecasts at this stage,” CBA economists wrote Monday.

“In other words, our economic forecasts and reliance on the RBA are unchanged despite the change in national leadership.”

Against the yen, the dollar weakened 0.24% to 127.54 after gaining ground initially. It’s still some distance from this year’s high of 131.34, which was reached on May 9.

won 0.64% to $110.24 a barrel. rose 0.9% to $112.68 a barrel.

Concerns about global economic growth have led to renewed support for gold.

Gold prices rose for the first time since mid-April as demand for safe havens was boosted by concerns over economic growth amid high inflation, ANZ analysts said in a research note Monday. “A weaker US dollar has also increased investor appetites.”

was up 0.3% early Monday at $1854.9 an ounce. [GOL/]

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