Asian stocks track US slide on inflation angst

May 11, 2021 editor

(May 11): Stocks dropped at the open in Asia on Tuesday after a slide in U.S. equities as surging commodity prices stoked concern about inflation. Treasury yields held a climb.

Shares fell in Japan, Australia and South Korea. U.S. contracts fluctuated after the Nasdaq 100 Index tumbled 2.6% amid the growing anxiety over inflation, which can threaten longer-horizon revenues typical of the technology sector. The benchmark S&P 500 Index fell from an all-time high, while the Dow Jones Industrial Average briefly topped 35,000 for the first time.

West Texas Intermediate crude fluctuated after a cyberattack forced the closure of a key U.S. pipeline, which operators hope to reopen by the end of the week. The spotlight remains on commodities and the economic and market implications of recent jumps in materials like copper and iron ore.

Concerns about knock-on price pressures boosted a gauge of inflation expectations to the highest level since 2006. That lifted Treasury yields slightly, taking the benchmark 10-year to 1.60%. The dollar held a decline.

The run-up in raw materials is intensifying debate ahead of a U.S. CPI report Wednesday that is forecast to show a strong gain in April. The year-on-year reading will be amplified by the pandemic shock a year earlier, but it plays into a broader market concern that the Federal Reserve may be forced to raise interest rates sooner than current guidance suggest to contain inflation.

“We’re going to see volatility definitely over the next couple of months” given uncertainty over the path of growth, Kristen Bitterly, head of capital markets in the Americas for Citi Private Bank, said on Bloomberg TV. “Cash and duration are punitive so you need to make sure that where you have that yield is non-rates sensitive parts of the market.”

The Australian dollar was steady ahead of the federal budget. The government is expected to unveil a narrowing budget gap and more spending.

Here are some key events to watch this week:

A range of Fed speakers are due this week, including Governor Lael Brainard on Tuesday, among others
Chinese inflation data are due Tuesday
OPEC monthly Oil Market Report is published with global demand forecasts and production estimates Tuesday
U.S. CPI report Wednesday is forecast to show prices continued to increase in April
Bank of England Governor Andrew Bailey speaks Wednesday

These are some of the main moves in markets:

Stocks