HONG KONG: Asian markets opened lower on Wednesday, tracking losses in the United States and Europe after traders responded negatively to higher-than-expected US inflation data, raising fears of a prolonged period of interest rate hikes.
Tokyo, Hong Kong, Shanghai, Seoul, Taipei and Sydney all opened lower at the start of trading, reversing gains made in recent days due to positive market expectations from the US labour department’s consumer price index (CPI) report.
On Tuesday, US government data showed that the annual increase in CPI had slowed slightly in August to 8.3 percent, but that prices continued to rise month on month, increasing by 0.1 percent.
The news shook equity markets, where there had been widespread expectations of US year-on-year inflation being around eight percent, with a decrease in prices compared with July.
The US and other economies have been battling sky-high price increases for months, with US yearly inflation hitting a 40-year high of 9.1 percent in June.
Wall Street shares plunged following the news, with the Dow losing nearly 1,300 points and the S&P 500 falling 4.3 percent.
The news will have dashed hopes of a slowdown in the US Federal Reserve’s campaign of increasing interest rates to cool the overheating economy.
The Fed has already instituted two consecutive 75-basis-point hikes, and there are widespread expectations it will make a similarly sized increase at its meeting next week.
After Tuesday’s data, however, some investors are now predicting the next Fed hike could be by a full percentage point.
