BANGKOK -- Shares slipped in Asia on Friday after benchmarks on Wall Street had their biggest drop in four weeks as investors registered disappointment over an inflation reading that came in hotter than expected.
Oil prices and U.S. futures also declined after the S&P 500 fell 1.4% Thursday following news that inflation at the wholesale level slowed by less than economists had forecast. It echoed a report on prices at the consumer level from earlier this week that suggested inflation isn’t cooling as quickly and as smoothly as hoped.
Tokyo's Nikkei 225 fell 0.7% to 27,513.13 while the Hang Seng in Hong Kong lost 0.7% to 20,836.08. The Kospi in South Korea sank 1% to 2,450.20.
The Shanghai Composite index gave up 0.2% to 3,243.24 and Australia's S&P/ASX 200 shed 0.9% to 7,346.80. Taiwan’s benchmark lost 0.5%.
Bangkok's SET index fell 0.2% after the government reported the economy grew at a meager 2.6% annual pace in 2022 and slowed more than expected in the last quarter of the year, to a 1.3% annual expansion, as a rebound in tourism failed to make up for weaker exports. On a quarterly basis GDP fell 1.5% in October-December.
On Thursday, the Dow Jones Industrial Average lost 1.3% to 33,696.85, while the Nasdaq composite dropped 1.8% to 11,855.83.
The S&P 500 ended at 4,090.41. A 2.7% fall for Microsoft, 3.3% drop for Nvidia and 4.7% slide for Tesla were some of the heaviest weights on the benchmark index.
Stocks have been churning recently on worries that persistently high inflation will push the Federal Reserve to get even more aggressive on interest rates. Higher rates can drive down inflation but also drag on investment prices and raise the risk of a serious recession.
“Continued strength in the inflation data suggests the Fed’s work is still not finished, and risks of a longer cycle are rising," Stephen Innes of SPI Asset Management said in a report.
Such fears have been most clear in the bond market, where yields have leaped this month as traders raise their forecasts for how high the Fed will take interest rates.
Treasury yields rose Thursday as traders upped their bets for how high the Federal Reserve will raise interest rates to combat inflation. Higher rates hurt the economy and weigh on financial markets. Other data on the economy chipped away at hopes the Fed might wrestle inflation lower without causing a severe recession.
The yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 4.67% from less than 4.60% before the inflation report’s release and from less than 4.10% earlier this month. It’s near its highest level since November, when the yield reached levels last seen in 2007.
Thursday’s inflation report showed that prices at the wholesale level were 6% higher last month than a year earlier, slower than December’s rate but worse than expected. Perhaps more concerning was that inflation accelerated in January on a month-to-month basis even after stripping out prices for food, energy and other layers.
The inflation report thudded onto Wall Street along with a batch of other data painting a mixed picture of the economy.
Fewer workers applied for jobless benefits last week than expected, suggesting that layoffs remain low across the economy. That’s good news for workers and another signal of strength for the job market, but the Fed worries it could also add upward pressure on inflation.
Loretta Mester, president of the Federal Reserve Bank of Cleveland, said in a speech Thursday that she saw “a compelling economic case” at the Fed's meeting earlier this month to raise rates by double what it did.
In other trading on Friday, U.S. benchmark crude oil lost 84 cents to $77.65 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing basis, gave up 83 cents to $84.31 per barrel.
The dollar rose to 134.76 Japanese yen from 133.99 yen. The euro slipped to $1.0637 from $1.0673.
