The sale of world stocks is deepening as the inflation trade develops

Global stocks plummeted as a sell-off hit by a faltering shift in the U.S. central bank’s situation as inflation deepened in Asia on Monday.

Japan’s Topix index fell 2.6 per cent in the region’s top exchanges while Australia’s S & P / ASX 200 fell 1.9 per cent. Hong Kong’s Hang Seng index fell 1.4% and South Korea’s Kospi fell 1.1%.

These waterfalls follow a the worst week for Wall Street’s S&P 500 benchmark in nearly four months. The sale was prompted by comments from Federal Reserve Chairman Jay Powell on Wednesday signaled the central bank could raise rates to tame inflation earlier than investors had previously thought, instead of maintaining an indefinite support policy.

The immediate change sent investors fleeing favored shares in the so-called “inflation trade,” or those benefiting from higher inflation, which has dominated markets since the launch of the Covid-19 vaccination unit at the end of last year.

Events for the S&P 500 were 0.5 per cent lower in Asian trade on Monday, while those for London’s FTSE 100 were down 0.8 per cent. The S&P 500 fell 1.3 percent on Friday.

Market sentiment was also hit by comments from James Bullard, chairman of the St. Louis Fed, who suggested that the U.S. could raise rates until the end of 2022 in the event of higher-than-expected inflation. . The Fed also reported last week that it will soon begin discussing when to tighten its $ 120 billion monthly bond purchases.

“This looks like a market that has invested too much in the Fed’s previous history, which could have taken it too literally,” said Robert Carnell, Asia-Pacific head of research at ING. “Central banks do not seem to be able to control the shock of reality hitting the markets when a more reasonable version of future events is revealed to them.”

“Surprised investors could cut back on inflation in the near future,” added Mansoor Mohi-uddin, chief economist at the Bank of Singapore. “But falling inflation expectations will let the Fed only decline in 2022, helping sentiment recover during the summer.”

In bonds, the 30-year U.S. Treasury yield fell 0.02 percentage points to 1.99 percent on Monday, marking the first drop below 2 percent since February as pressure mounted on trades. of reflection.

Commodity prices stabilized after falling last week. Brent crude, the international benchmark for oil, rose 0.4 percent to $ 73.82 a barrel. West West Intermediate rose 0.5 percent to $ 72.03.

In China, the CSI 300 index of shares listed in Shanghai and Shenzhen jumped 0.6 percent after banks abandoned the country’s benchmark lending rate. Lenders benchmark new loans against the rate.

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