Traders in Asia are treading carefully ahead of the release of the inflation data.
Investors awaited vital US inflation statistics that might play a major part in the Federal Reserve’s plans to tighten monetary policy on Wednesday, while worries about a global energy shortage jangled nerves.
With the world’s largest economy on the mend, the Federal Reserve of the United States has already indicated that it will begin to phase down the substantial financial aid provided at the outset of the pandemic.
However, supply chain bottlenecks, skyrocketing demand fueled by reopenings, and rising fuel costs have pushed inflation to new highs in recent months, putting pressure on bank CEOs to act to keep prices from spiraling out of control.
Long periods of higher-than-targeted inflation are raising anticipation that the Fed will have to raise interest rates after its mammoth bond-buying program is completed.
And, according to some analysts, the first raise might occur as early as mid-2022, significantly ahead of the original forecast of early 2023.
The possibility of increasing borrowing costs has put the brakes on a year-and-a-half-long surge in global stock markets.
The forthcoming earnings season is also being closely studied for clues about the impact of trade constraints and increasing inflation on firm profits, with fourth-quarter estimates of particular interest.
“The supply chain difficulties have the potential to do substantial damage,” Again Capital’s John Kilduff warned. “It has the potential to be a major negative for the world economy.” The three main indexes on Wall Street gave a sluggish start, as Asia battled to find its footing.
Tokyo, Sydney, and Taipei all fell, while Seoul, Singapore, Manila, Jakarta, and Wellington all rose.
Shanghai was also down ahead of the announcement of China’s own inflation figures on Thursday, with prices in the world’s second largest economy also rising substantially.
After rallying to multi-year highs on strong demand, oil prices began to fall, with analysts speculating that prospects for talks between world powers and Iran over the country’s nuclear program brought some relief.
A settlement might let Tehran to resume global crude exports, alleviating supply pressures ahead of the upcoming northern hemisphere winter.
Oil and other fuel costs have soared due to limited supplies and the reopening of economies, prompting fears about the impact on global economic recovery.
Meanwhile, Democratic comments that US President Joe Biden’s multibillion-dollar infrastructure and social-care initiatives could be scaled back have boosted hopes that the bills will pass Congress.
“The outlook’s risks are increasing, and. The Washington Newsday Brief News is a daily newspaper published in Washington, D.C.