Asia Stocks Drop as Inflation Worries Mount: Markets Wrap

(Bloomberg) -- Asian stocks extended a selloff Thursday after a U.S. inflation reading saw the S&P 500 drop the most since February and bond yields jump on concern that price pressures could stifle the economic recovery.

While declines in Japan, Australia and South Korea didn’t match the magnitude of the pull back in U.S. gauges, MSCI Inc.’s regional benchmark erased this year’s gain. U.S. futures fluctuated after the technology sector paced a 2.6% decline in the Nasdaq 100. The S&P 500 dropped more than 2% in a third-straight day of declines, though the energy sector climbed as commodity prices continued to rally.

Treasury yields steadied after jumping despite strong demand for 10-year notes in a monthly auction. The dollar held an advance.

Oil retreated back below $66 a barrel. The biggest U.S. gasoline pipeline is reopening after a cyberattack that sparked acute fuel shortages. Copper’s advance stalled after the inflation numbers.

U.S. consumer prices climbed in April by the most since 2009, adding fuel to the debate over whether inflation will be persistent enough to force the Federal Reserve to tighten policy sooner than thought. The surprise reading included broad-based price pressures, and a market gauge of inflation expectations over the next five years touched its highest level since 2005 before easing.

The consumer price index increased 0.8% from the prior month after a 0.6% gain in March. Excluding the volatile food and energy components, the so-called core CPI rose 0.9% from March. Fed Vice Chair Richard Clarida said he was surprised by the jump, but that it should prove largely transitory.

“The concern is that the markets have lost a little bit of confidence that the Fed has control of inflation; I don’t think it’s necessarily the level, I think it’s the concern over ‘is the Fed going to wait too long to address the inflation question,”’ Victoria Fernandez, Crossmark Global Investments chief market strategist, said on Bloomberg TV. “I am not sure the market is extremely comfortable with that at this point.”

Elsewhere, Bitcoin extended a drop after Elon Musk tweeted that Tesla Inc. has suspended vehicle purchases using the digital currency over environmental concerns. He added that Tesla will not be selling any Bitcoin.

These are some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 9:22 a.m. in Tokyo. The S&P 500 fell 2.1%
• Nasdaq 100 contracts added 0.3%. The Nasdaq 100 slid 2.6%
• Japan’s Topix index fell 0.7%
• Australia’s S&P/ASX 200 Index lost 0.3%
• South Korea’s Kospi index declined 0.7%

Currencies

• The yen traded at 109.76 per dollar after slipping 1%
• The offshore yuan was at 6.4566 per dollar
• The Bloomberg Dollar Spot Index was steady after rising 0.7%
• The euro was at $1.2074

Bonds

• The yield on 10-year Treasuries held at 1.69% after jumping seven basis points
• Australia’s 10-year bond yield rose four basis points to 1.81%

Commodities

• West Texas Intermediate crude fell 0.6% to $65.68 a barrel
• Gold was at $1,814.50 an ounce

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