Asian shares track technology-led sell-off on Wall Street

After the release of worse inflation figures than expected, shares fell in Asia. This prompted heavy selling of technology stocks at Wall Street.

Hong Kong’s benchmark fell 2.2% to 19385.47 following the arrests of several prominent democracy advocates, including a retired Roman Catholic cardinal.

After Beijing tightened controls in China’s semi-autonomous territory, last weekend, a hard-line chief executives was elected. This led to the arrests and deportations of Denise Ho, singer Denise Ho, and Cardinal Joseph Zen.

The markets are more concerned with inflation, as central banks reduce support for countries that were aided during the pandemic. After witnessing high inflation for longer than anticipated, the U.S. Federal Reserve decided to increase interest rates aggressively.

Wednesday’s report from the U.S. Labor Department showed inflation slowed a touch in April, down to 8.3% from 8.5% in March. Investors also saw some encouraging signs in the data that the consumer price index (or CPI) may be peaking. However, the numbers are still higher than what economists expected.

“The consensus is that inflation has peaked, at least in the US. Global equity markets will have a floor depending on how fast US CPI inflation falls,” Stephen Innes, SPI Asset Management saidComment

Producer prices are due later Thursday.

Tokyo’s Nikkei225 grew 1.8% to 25,748.72.

The Shanghai Composite index lost 0.5% to 3,043.59. Australia’s S&P/ASX 200 lost 1.6% to 6,936.90. South Korea’s Kospi declined 1.5% to 2,552.45.

On Wednesday, an early rally faded, leaving the S&P 500 1.6% lower at 3,935.18. This erased gains made the day before when the benchmark index ended a three-day losing streak.

The Dow Jones Industrial Average declined 1% to 31834.11. The Nasdaq declined 3.2% to 11364.24, due to tech stocks impacting the wider market. Each of the three major indexes is on track for another sharp weekly decline.

Stocks in smaller companies also dropped. The Russell 2000 dropped 2.5% to 1,718.14.

Economists saidThe Fed will continue to increase interest rates rapidly and possibly sharply in the coming months with the inflation report, but Wall Street was experiencing erratic trading due to the data.

Initial jumps in Treasury yields were tempered by a gradual decline as the morning progressed. The 10-year Treasury yield shot up to 3.08% overnight before falling back to 2.90% by Thursday morning.

The Fed has already lowered its key short-term rate from near zero to curb high inflation. This was the record low it had reached during the pandemic. It also saidIt could continue to raise rates by twice the usual amount at upcoming meetings.

Although these moves are meant to slow down the economy and help curb inflation, the Fed runs the risk of causing a recession if rates go too high or fast. Higher rates tends to push stocks and other types of investments down. Investors are attracted to safer, higher-yielding Treasury bonds.

High rates make big tech companies, high-growth stocks, and even cryptocurrency less attractive. The Nasdaq’s loss of more than 27% so far this year is considerably worse than the roughly 17% drop for the S&P 500, for example.

Apart from interest rates, in China, shutdowns meant to stem COVID are raising the risk of more supply chain disruptions for global companies and a slowdown in the world’s second-largest economy.

In the meantime, the war in Ukraine is likely to increase inflation due to disruptions to oil and natural gas markets.

In electronic trading on New York Mercantile Exchange, benchmark U.S. oil fell to $103.67 per barrel from US$2.04 It rose 6% Wednesday.

Brent crude, an international pricing standard, dropped $1.97 per barrel to $105.54. It rose 4.9% from the previous day.

The dollar fell to 129.62 Japanese Yuan from 129.95 yen in currency trading. From $1.0517, the euro dropped to $1.0506