Asian markets slide ahead of US CPI data as rate pressure increases

On Wednesday, the majority of Asian markets declined as investors evaluated the expectation of further inflation and Federal Reserve signals. News of increased trade investigation by the United States against China also soured investor mood.

Record-high closing on the S&P 500 and the NASDAQ, driven mostly by gains in heavyweight technology firms, offered little encouragement to regional equities. In Asian trading, U.S. stock futures saw minimal movement.

According to reports, the United States was thinking about imposing more extensive trade penalties on semiconductor shipments to Russia. These sanctions may target chip resellers in China and Hong Kong who might be supplying Moscow.

Concerns about deteriorating economic relations between the largest economies in the world were raised by the heightened American inspection of Chinese corporations. Earlier in 2024, the United States imposed higher import duties on a number of significant Chinese sectors.

Additionally, mixed Chinese inflation statistics offered mediocre economic indicators. Consumer price index inflation rose less than anticipated in May, but producer price index inflation decreased at its worst rate in 15 months.

Other Asian markets saw a decline as well. Japan's TOPIX and Nikkei 225 indices both experienced approximately equal declines following May's PPI inflation reading which was higher than anticipated.

Days before the Bank of Japan meeting, when it is widely anticipated that the central bank would tighten policy even further by reducing part of its bond purchases, the reading was taken.

The BoJ's prediction that inflation would increase this year was also supported by the higher PPI figure, which gave the bank additional reason to boost interest rates.

The Fed is largely expected to keep rates unchanged later when it begins its two-day meeting.

However, investors will be keenly observing its plans for rate decreases and inflation projections.

Important CPI data is also scheduled on Wednesday before the Fed meeting; it is anticipated to reveal that inflation remained sticky in May, providing little incentive for the Fed to start reducing rates.

(Sources: investing.com, reuters.com)