Asia: Markets down as inflation concerns return to the fore

[HONG KONG] Asian equities dipped on Wednesday as a record-breaking rally on Wall Street finally came to an end with inflation returning to the fore as figures showed prices in the United States and China continue to surge.

While markets - particularly in the United States - have chalked up all-time highs in recent days and weeks, traders remain nervous about the constant stream of data showing global inflationary pressures building as supply chains are snarled and demand spikes.

In reaction, central banks have turned increasingly hawkish with some raising interest rates and others paring back other vast financial support measures put in place at the start of the pandemic and which have been key to the rally in world equities for the past 18 months.

On Wednesday, China released a report showing the prices paid at factory gates had jumped 13.5 per cent on year in October to its highest level in more than two decades owing to soaring energy prices and as supplies were hit by lockdowns in parts of the country suffering new virus outbreaks.

The figures also showed a further pick-up in consumer inflation.

The readings will cause a headache for leaders as they fight to prevent prices running out of control but also provide support to the economy as its recovery stutters under pressure from the recent Covid flareups.

Wednesday's news came a day after the Labor Department said US wholesale prices remained elevated last month and observers said the advances would likely continue this year. The consumer price index is released later Wednesday.

"Because we haven't seen inflation for a while, people aren't used to it," Drew Matus, of MetLife Investment Management, told Bloomberg Television.

"What we should expect over the next half a year is - as people become more understanding of what the Fed might do - we are going to see more volatility."

Shanghai and Hong Kong led the losses while Tokyo, Sydney, Seoul, Singapore, Seoul, Wellington, Manila and Jakarta were also in negative territory.

Investors were keeping tabs on developments in the China Evergrande saga, with the struggling property giant facing a deadline Wednesday to pay interest on three bonds worth a total of US$148 million.

The firm has fulfilled its obligations on two previous notes, and it managed to raise around US$144 million last week by slashing its stake in an internet company.

However, there remains a lot of concern that the crisis at the firm, which is drowning in debts worth more than US$300 billion, will spill into the wider economy.

Bitcoin was sitting around US$66,900, a day after hitting a new record high of US$68,513.

REUTERS