Asian stock markets followed Wall Street lower for a second day Thursday after unexpectedly strong U.S. consumer price increases fueled worries inflation might drag on an economic recovery.
Market benchmarks in Shanghai, Tokyo, Hong Kong and Southeast Asia retreated. Overnight, Wall Street’s benchmark S&P 500 index recorded its biggest one-day drop in three months. That came after consumer prices rose in April at their fastest year-on-year pace in 13 years.
Rising prices reflect growing industrial and consumer activity after last year’s global shutdown to fight the coronavirus pandemic. But investors worry surging inflation might disrupt the recovery or prompt central banks to withdraw stimulus and near-zero interest rates.
The market reaction was “mild, reflecting the belief that this jump in inflation will eventually calm,” Tai Hui of JP Morgan Asset Management said in a report.
The Federal Reserve says this surge should be temporary, but “if inflation does not calm,” the challenge to the U.S. central bank’s credibility “could be disruptive,” Hui said.
The Shanghai Composite Index fell 0.7% to 3,437.14 and the Nikkei 225 in Tokyo tumbled 1.8% to 27,635.47. The Hang Seng in Hong Kong lost 0.9% to 27,970.78. The Kospi in Seoul sank 0.8% to 3,137.03 and Sydney’s S&P-ASX 200 was 0.6% lower at 7,001.80.
New Zealand also retreated. Markets in India, Indonesia and Singapore were closed for holidays.
On Wall Street, the S&P 500 lost 2.1% to 4,063.04. The Dow Jones Industrial Average lost 2% to 33,587.66 in its biggest decline since January. The Nasdaq gave up 2.7% in its largest pullback since March.
Apple, Microsoft and Amazon all fell more than 2%. Tesla fell 4.4%, bringing its pullback this month to nearly 17%.
