As US data fails to calm recovery fears, Asian markets fall once more.
Asian markets fell again on Wednesday, after another sell-off on Wall Street, as data showing a slowdown in US consumer inflation last month failed to dispel concerns about the Delta variant’s impact on the global economic prospects.
Following a strong start to the month, global markets have retreated in recent sessions as the virus has shook investor confidence. A number of nations have seen an alarming increase in new cases, forcing some, notably China, to reimpose strict containment measures.
Investors are also dealing with a slew of other challenges, including the Federal Reserve’s plans to tighten monetary policy, China’s regulatory crackdown on private companies, and the possibility of a default by Chinese property behemoth Evergrande, which is owed more than $300 billion.
Concerns that inflation could compel the Fed to begin winding down its market-supporting measures sooner than expected were eased Tuesday by data showing US consumer prices climbed at a slower pace than expected.
Because of increased demand and tighter supplies, producer prices — what firms pay at the factory gate – hit a record high in August, the reading took on added significance.
The statistics indicated a modest decrease, supporting Fed officials’ claims that the large increases were due to the reopening and short-term supply difficulties.
However, investors in the United States shrugged off the news, sending all three major indices lower.
The softening came as a result of concerns about the spread of the Delta variety, which is causing infection rates to skyrocket, according to analysts. This resulted in a substantial decline in airline fares, as well as a drop in used car sales, which were a major cause of recent inflation surges.
“There are still many variables suggesting inflation is unlikely to ease significantly,” said Rodrigo Catril of the National Australia Bank. Food, housing, and other goods continue to experience high inflation.
“As the Delta wave subsides, the drop in airline tickets and hotel room rates is likely to reverse.”
While the print would lessen pressure on the Fed to tighten policy, he also noted that the “debate over higher US inflation has not gone away, and next year the primary emphasis will be to what degree the predicted gain in wages will produce longer-lasting upward pressure on prices.”
He suggested a taper in November or December was still possible.
Envestnet Inc’s Dana D’Auria told Bloomberg Television: “It’s impossible to dispute at this stage that (inflation). Brief News from Washington Newsday.