Asian stocks dipped and cryptocurrencies extended losses on Wednesday as uncertainties over inflation prompted investors to reduce exposure to riskier assets for now.
Also weighing on digital coins was a new Chinese ban on financial institutions providing services related to cryptocurrency transactions.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) dropped 0.3% though Hong Kong and South Korea are closed for holiday.
Mainland China’s CSI300 (.CSI300) slipped 0.6% while Japan’s Nikkei (.N225) lost 1.1%.
Wall Street stocks slid late in the session to end lower on Tuesday, unable to sustain gains made after bumper earnings from Walmart (WMT.N) and Home Depot (HD.N).
The S&P 500 (.SPX) lost 0.85%, with telecom shares leading the decline, while the Nasdaq Composite (.IXIC) dropped 0.56%.
“Now that investors are pre-occupied with inflation, they are probably reluctant to make big decisions until they see a clearer picture,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
“Inflation worries will keep markets uncertain for now, even though I don’t expect stock prices to collapse given economic re-openings.”
The Federal Reserve has stuck to the narrative that a recent rise in inflation would be transient and that it therefore should keep its easy monetary policy settings.
The minutes from the Fed’s April meeting, to be published late on Wednesday, are expected to repeat that message.
“Inflation remains the biggest theme, whether it is real and whether the Fed may need to change its policy because of that,” said Kazushige Kaida, head of forex sales at State Street Bank’s Tokyo branch. “At the moment, markets are putting faith, after a fashion, in the Fed’s narrative.”
Yet an unexpected pickup in consumer inflation and signs of a labour shortage in the United States have prompted investors to dump assets that had risen sharply over the past year.
Cryptocurrencies are one such extreme case.
Bitcoin dropped as much as 5.3% to hit its lowest level since early February and last stood at $40,973 , having lost more than a third of its value from a peak of $64,895 hit just over a month ago.
Ether, the second largest cryptocurrency, changed hands at $3,199 , down more than 25% from its record peak hit last Wednesday.
While cryptocurrencies were bruised by China’s fresh ban on their transactions, they were not alone in facing pressure. read more
Some commodities that have benefited from reflation trade have also lost steam, with U.S. lumber futures losing almost 25% in the last three sessions.
Oil prices pulled back also after media reports the United States and Iran have made progress on reviving a deal restricting the OPEC country’s nuclear weapons development, a development that could lead to increased supply from Iran.
U.S. crude futures dropped 0.9% to $64.9 per barrel while Brent futures lost 0.9% to $68.12 per barrel .
That…
Read More: Asian shares slip, bitcoin tumbles as inflation worries linger