December 8, 2023

Brighton Journal

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Asian Stocks Fall After BoE Shock Over Interest Rates and Rising Inflation in Japan By

Asian Stocks Fall After BoE Shock Over Interest Rates and Rising Inflation in Japan By
© Reuters – Most Asian stocks fell sharply on Friday after a more-than-expected rate hike from the Bank of England added to concerns about tightening monetary policy, while a victory over Japanese consumer inflation also rattled sentiment.

In addition to risk-driven assets, they have been hurt somewhat by those who have testified before Congress that the bank may raise interest rates at least twice more this year.

Both factors have escalated concerns about tightening global monetary policy, and have seen investors largely dump risk- and interest-rate-sensitive assets.

Hong Kong was the worst performer in Asia, falling 1.8%, catching up after Thursday’s holiday. The broader Chinese markets were closed for the day, but closed lower on Wednesday after being in the country.

The South Korean index fell 0.7%, while the Australian index lost 1.1% although the data showed some improvement in the activity of the manufacturing and services sector during the month of June.

Japanese stocks fall after inflation grows more than expected

The Japanese index fell 1.7%, while falling 1.5% after data showed inflation grew more than expected in the 12 months through May.

While core inflation was down from the previous month, the reading that showed inflation excluding food and fuel costs rose to a 42-year high in May, indicating that Japanese core inflation remained high.

The trend indicates increasing pressure on the Bank of Japan to tighten policy, even as the bank confirmed that it has no plans to change its ultra-loose policy in the near future.

High inflation could also offset the recent resilience of the Japanese economy, which has partially attracted a heavy dose of foreign buying into domestic stocks.

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Investors used the higher inflation reading as a catalyst to lock in recent gains in the Japanese market. The Nikkei and Topix both rose to 33-year highs earlier in the week.

Indian stocks are set to fall further than their record lows

For the India index, he pointed to a weak opening in domestic stocks, after both Nifty and Nifty fell from a record high on Thursday.

While optimism about the relative strength of the Indian economy has prompted a slew of foreign buys into the domestic markets, analysts have recently warned that small- and mid-cap stocks may see some correction, given their higher valuations in a weak global economic environment.

Fears of a rebound in Indian retail inflation have also re-emerged, after the Indian monsoon was delayed.