Asian stocks slide over global economy concerns
As a result of rising prices in the United States, Asian stock markets have plummeted, raising fears that the Federal Reserve may tighten its monetary policy to combat inflation.
At the same time, the US dollar rose to 135 yen for the first time in more than two decades.
It comes after official figures released on Friday revealed that US inflation hit a 40-year high last month.
Investors’ anxieties over global economic development were heightened by a warning in Beijing about Covid-19 infections.
On Monday, Japan‘s Nikkei index concluded the day with a loss of little over 3%. The Hang Seng in Hong Kong was down 3.4 percent, while the Kospi in South Korea was down 3.3 percent.
The Australian stock market was closed for the public holiday commemorating the Queen’s birthday.
Brent crude has dropped by approximately $2 to just over $120 per barrel, putting pressure on global oil prices.
At the same time, the Indian rupee has hit a new low against the US dollar, falling below 78.
Meanwhile, Bitcoin has dropped below $25,000 for the first time since December 2020.
Official data released on Friday revealed that prices in the United States rose faster than expected last month, with rising energy and food prices pushing inflation to its highest level since 1981.
After easing in April, the annual inflation rate increased to 8.6% in May, according to the Labor Department.
This dashed expectations that inflation had reached a nadir, and instead alerted investors to the possibility that the Federal Reserve would respond more forcefully to the problem.
On Wednesday, the central bank is expected to announce its next policy move.
It has an 80% chance of raising its main interest rate by half a percentage point again, according to market expectations.
After a lesser increase in March, the Federal Reserve announced its largest interest rate hike in more than two decades last month, raising its benchmark interest rate by half a percentage point to a range of 0.75 percent to 1 percent.
Households have been squeezed by growing living costs, placing pressure on authorities to address the problem.
The growing cost of fuel is a serious issue in the United States. According to the American Automobile Association, the price of gasoline averaged more than $5 per gallon for the first time on Saturday.
However, investors are concerned that if interest rates are raised too high and too rapidly, the Fed and other major central banks would take forceful steps to curb increasing prices and create a sharp economic slowdown.
Investors are also concerned about the spread of Covid-19 in China, following the announcement on Sunday by Beijing’s most populous district of Chaoyang that three rounds of mass testing would be conducted to control a “ferocious” outbreak – 166 confirmed cases so far – that began last week at a bar in a nightlife and shopping area.
This has sparked fears of future lockdowns, which might stifle the city’s economic resurgence just as restrictions were being relaxed.