Asian shares slip as inflation fears fuel US Fed, BOJ rate-hike bets
Strong corporate earnings should provide support for Wall Street if borrowing costs rise, says analyst
Asian stock markets declined on Monday (Sep 14) amid supply worries that sent oil prices soaring once more, and as investors anticipated possible interest rate hikes in the US and Japan this week. Brent crude oil prices surged 3% after attacks on a Saudi oil pipeline and Houthi advances threatened to disrupt global energy supplies further.
The scheduled meeting in Oman to discuss the opening of the Strait of Hormuz was postponed. Worries over potential oil price hikes and global inflation fueled the market decline. The US Federal Reserve appeared likely to raise rates by 25 basis points on Wednesday, with a 86% probability, according to JPMorgan's chief US economist, Michael Feroli.
The Fed may hike rates again in December, potentially marking the start of a more extended tightening cycle. Analysts expect the Fed to hike rates twice this year, though uncertainties remain. Brent futures rose 3.1% to $107.84 a barrel, while US crude climbed 2.8% to $102.85 a barrel. The Nikkei futures fell 2% at 63,260, while S&P 500 and Nasdaq futures slipped 0.5% and 1%, respectively.
US Treasury yields showed a slight uptick, with 2-year yields increasing 26 basis points and 10-year yields rising 19 basis points as the yield curve flattened. Despite strong corporate earnings, Goldman Sachs believes equities will struggle with rising borrowing costs, but the bullish trend may still persist. The Bank of Japan is expected to raise its cash rate by 0.25% to 1.25% at its meeting on Friday, alongside sounding hawkish on further tightening measures to curb a declining yen. The US dollar was stable at 153.77 yen, while the euro remained steady at $1.16.
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