By Gina Lee
Investing.com – Asia Pacific stocks were mostly down on Wednesday morning, after their U.S. counterparts also fell from record highs, over a surprise jump in U.S. inflation. The data also reignited the debate on when the U.S. Federal Reserve will begin asset tapering.
Japan’s Nikkei 225 was down 0.31% by 10:45 PM ET (2:45 AM GMT) and South Korea’s KOSPI was down 0.27%.
In Australia, the ASX 200 was up 0.23%, even as a lockdown in Sydney was extended for a further two weeks. However, the Westpac consumer sentiment index, released earlier in the day, rose 1.5% in July against the previous month’s 5.2% drop.
Hong Kong’s Hang Seng Index was down 0.57%, with the U.S. warning American companies of increasing risks of operating in the city earlier in the week.
U.S.-China tensions are rising as U.S. President Joe Biden nominated Alan Estevez to lead the Bureau of Industry and Security that oversees export control and could limit China’s access to technology. The U.S. is also discussing a proposal for a digital trade agreement covering Indo-Pacific economies.
China’s Shanghai Composite fell 0.92% and the Shenzhen Component was down 0.80%, with investors still digesting a surprise surge in exports year-on-year in June. They now await further data, including the GDP for the second quarter and industrial production, due on Thursday.
U.S. data released on Tuesday said the core consumer price index (CPI) rose a higher-than-expected 0.9% month-on-month in June. With the inflation print topping forecasts in an indication of higher costs as the country re-opened from COVID-19, it remains to be seen whether the readings will prompt the Fed to begin asset tapering sooner than expected, despite its insistence that inflationary pressures would be temporary.
Fed Chairman Jerome Powell will testify before the Senate Banking Committee later in the week, with his comments to be closely monitored for guidance on the central bank’s next move.
“The debate is centered around where will inflation settle when things normalize about a year from now, is it north of 2% or south of 2%?” Rockefeller & Co. chief investment officer Jimmy Chang told Bloomberg, adding he expects the Powell testimony to sound “fairly dovish.”
In U.S. Treasuries, weak demand for the 30-year bond auction led to a bout of steepening that reversed a flattening move spurred by the U.S. CPI reading. The benchmark 10-year yield remained above 1.41%, however.
On the central bank front, the Reserve Bank of New Zealand kept its interest rate unchanged at 0.25%. The Bank of Korea and the Bank of Japan will hand down their respective decisions on Thursday and Friday.
Also on investors’ radar is the earnings season, with optimism for the economic recovery from COVID-19 driving global stocks to a record high. However, earnings from JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc. (NYSE:GS) that kicked off the season were mixed.