Investing.com– Most Asian stocks fell on Thursday, tracking overnight declines on Wall Street after hotter-than-expected U.S. inflation eroded bets on early interest rate cuts by the Federal Reserve.
Inflation data from China also showed Asia’s largest economy remained stuck in a sustained deflationary trend, further denting sentiment.
Wall Street indexes fell in overnight trade after hotter-than-expected (CPI) inflation data saw traders largely scale back bets on a June rate cut by the Fed.
U.S. stock index futures fell in Asian trade.
Chinese stocks fall after CPI shrinks more than expected in March
Weak Chinese inflation data also rattled regional markets. China’s and indexes fell 0.2% and 0.4%, respectively, after data showed shrank more than expected in March.
A sustained decline in also indicated little signs of economic recovery in China, which has been struggling with a sustained deflationary trend over the past year.
Weakness in China bodes poorly for broader Asian economies, given that they rely on the country as a major trading partner.
Losses in mainland stocks dragged Hong Kong’s index down 1.4%, largely reversing gains made on Wednesday on the back of a rally in technology stocks.
Australia’s fell 0.8% as recent gains in commodity prices provided only a limited boost to heavyweight mining stocks. Concerns over China also weighed on Australian stocks, given their heavy exposure to the mainland.
Japan’s index fell 0.6%, while the lost 0.3%. Bigger losses in Japanese stocks were limited by strength in major exporters, as the tumbled to 34-year lows.
But uncertainty over potential government intervention to support the yen also dented sentiment towards Japanese markets.
South Korea’s fell 0.4%, while Indian markets were closed for a holiday. Still, the hit a record high on Wednesday.
June rate cut bets evaporate
Other Asian markets also retreated on Thursday, dented by the prospect of higher-for-longer U.S. interest rates.
Sentiment towards risk-driven markets was largely battered by the strong U.S. CPI data. The reading, coupled with hawkish , saw markets slash expectations for a 25 basis point rate cut in June. The minutes showed that even before the hot CPI reading for March, Fed officials were already growing concerned with sticky inflation.
The showed markets were now pricing in an over 80% chance for a hold in June, and 17.5% chance of a rate cut.
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