By Elaine Curtinbach, AP Business Writer
BANGKOK (AP) – Shares in Asia sank on Monday after reports of a sharp rise in US inflation last month pushed up Wall Street prices.
Key regional markets fell more than 2% in early trading on Monday, while US futures fell more than 1%. On Friday, the S&P 500 sank 2.9%, closing in its ninth losing week in the last 10.
Investors were expecting a report from the much-anticipated Consumer Price Index to show that the worst inflation in generations had slowed a touch as it crossed its peak last month. Instead, the US government said inflation rose to 8.6 percent in May from 8.3 percent a month earlier.
Investors took Friday’s report to suggest that the Federal Reserve would raise interest rates and take other measures to slow the economy, in order to force inflation to ease.
Tokyo’s Nikkei 225 index fell 2.6 percent to 27,088.86 and Hong Kong’s Hang Seng fell 2.6 percent to 21,245.99. In South Korea, the Kospi fell 2.8% to 2,524.52, while the Shanghai Composite Index fell 1% to 3,252.58.
Markets in Australia are closed for the holidays.
On Friday, the S&P 500 sank 2.9% to lock in its ninth losing week in the last 10 years, and a drop in bond prices sent Treasury yields to their highest level in years. The Dow Jones Industrial Average fell 2.7 percent, and the Nasdaq Composite fell 3.5 percent.
Rising expectations are that the Fed will raise its key short-term interest rates to half a percent in each of its next three meetings starting next week. In September, it was the third time in recent weeks that there has been a debate among investors. Only once since 2000 has the Fed increased that amount in the last month.
Rising prices and expectations of Fed policy have pushed the two-year Treasury yields to their highest level since 2008 and the S&P 500 is down 18.7% from a record set in early January. The biggest losers have been high-tech technology stocks, corrupt currencies and other big winners in the early days of epidemics. Losses are now increasing as retailers and others warn of impending profits.
Since the onset of the epidemic, record low interest rates set by the Fed and other central banks have helped keep investment prices high. Now the “easy mode” for investors is being shut down. As higher interest rates make borrowing more expensive, dragging down the costs and investments of households and companies, there is also a risk that the Fed could push the economy into recession.
Investors fear that food and fuel costs could continue to rise, regardless of how aggressive the Fed moves, partly because of the Ukraine crisis, which is a major loser for the world. There is basketball.
Another report on Friday found that consumer sentiment was worsening than economists expected. Early studies at the University of Michigan were largely due to rising petrol prices.
On Saturday, a gallon of regular gas exceeded the national average of $ 5, according to the AAA Auto Club.
This raises a number of profit warnings from retailers, indicating that US buyers are slowing down or at least adjusting their spending due to inflation. Such spending is central to the US economy.
The two-year Treasury yield rose to 3.05% after a report of inflation from 2.83% at the end of Thursday, a major step for the bond market.
10-year production also increased, but not as dramatically as two-year production. It rose to 3.19% early Monday, 3.15% on Friday and 3.04% on Thursday. This is its highest level since 2018.
The narrowing of the gap between the two products indicates that investors in the bond market are more concerned about economic growth. In general, the gap is wider, 10-year yields are higher because they require investors to close their dollars longer.
Two-year yields over 10-year yields would be a signal to some investors that a recession could occur in a year or two.
Elsewhere, benchmark US crude traded down $ 2.11 to 8 118.56 a barrel in electronic trading on the New York Mercantile Exchange. It fell 84 cents to .6 120.67 on Friday.
The benchmark price for international trade, Brent crude, rose from $ 2.13 to 9 119.88 a barrel.
The dollar rose from 134.37 yen to 134.81 Japanese yen. The euro fell from $ 1.0518 to 0 1.0493.
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