Asian markets fall as oil rises and inflation fears escalate

Published on: Amended:

Hong Kong (AFP) – Asian markets fell on Thursday as an oil rally intensified inflation fears, with senior officials warning of more suffering to come as the war in Ukraine continues to drive up prices and exert additional pressure on the global economy.

Wall Street buyers fell again after data showed U.S. crude and gasoline inventories sank, just as the summer driving season begins and demand from major OPEC members would rise further. as China reopens.

The sharp downward revision by the OECD of its global growth outlook and the doubling of its inflation forecasts added to the gloom.

The gloomy mood was only slightly offset by lingering optimism that Beijing’s tech crackdown was near an end.

The two major crude contracts jumped more than 2% on Wednesday to three-month highs after figures showed the largest US storage depot saw a sharp drop in reserves last week, suggesting that prices high did not deter people from driving.

Meanwhile, White House press secretary Karine Jean-Pierre said officials expect Friday’s highly anticipated consumer price index to be “high.”

The comment raised expectations that the Federal Reserve would stick to its hawkish trajectory and raise interest rates by half a point for at least three more meetings this year as it tries to lower the inflation from four-decade highs.

Analysts said investors were unlikely to get any reprieve until crude oil – a key driver of inflation since Russia’s invasion of Ukraine – was brought under control.

“A pullback in crude would be crucial to any prolonged rally in risk, given the implications for inflation expectations,” said Stephen Innes of SPI Asset Management.

“And for the central banking fraternity intent on preloading rates, Chapter Two of the current playbook indicates that aggressive tightening is likely to cause a significant decline in housing, consumer confidence and consumption. , which will eventually drag their respective economies into recession and send stocks plummeting.

“So until we hit peak inflation, which will trigger a less hawkish Fed and lower recession odds, it could be a bleak summer for global stock pickers.”

He added that prices are likely to rise further for the time being as China emerges from several months of lockdown, a sentiment that UAE Energy Minister Suhail Al-Mazrouei agreed with.

“With the pace of consumption that we have, we are far from the peak because China has not yet returned,” he told a conference on Wednesday. “China will come with more consumption.”

Unease over rising prices and rates saw all three major Wall Street indexes fall along with European markets, with the focus on the European Central Bank’s policy meeting later on Thursday.

The ECB should start ending its massive bond buying program and signal that a rate hike is in the works.

Asian traders followed suit on Thursday.

Hong Kong fell even as tech companies continued to profit on hopes that the Chinese crackdown was nearly over, while Shanghai, Sydney, Seoul, Singapore, Taipei, Manila and Wellington were also in the red.

Tokyo, however, edged higher as the yen sat at a two-decade low on broader monetary policies from the United States and Japan, which show no sign of a rate hike.

Investors were rattled by a report from the Organization for Economic Co-operation and Development, which said it had cut its growth outlook for 2022 to 3% – from 4.5% forecast in December – due to the war in Ukraine.

It also doubled its inflation estimate to 8.5%, a 34-year high.

“The world is ready to pay a heavy price for Russia’s war against Ukraine,” wrote Laurence Boone, chief economist and deputy secretary-general of the OECD.

And Anna Han of Wells Fargo Securities told Bloomberg Television: “Our view is that the risk of a recession by the end of 2023 is about 40%.”

Key figures around 02:30 GMT

Tokyo – Nikkei 225: 0.2% higher at 28,278.45 (pause)

Hong Kong – Hang Seng Index: DOWN 0.7% to 21,851.49

Shanghai – Composite: 0.6% down to 3,245.66%

Brent from the North Sea: +0.1% to 123.72 dollars a barrel

West Texas Intermediate: UP 0.1% to $122.20 a barrel

Dollar/yen: UP to 134.36 yen against 134.29 yen on Tuesday evening

Euro/dollar: DOWN to $1.0717 vs. $1.0720

Pound/dollar: DOWN to $1.2524 vs. $1.2535

Euro/pound: UP at 85.57 pence against 85.54 pence

New York – Dow: DOWN 0.8% to 32,910.90 (closing)

London – FTSE 100: 0.1% lower at 7,593.00 (close)