TOKYO: Asian stocks dipped and cryptocurrencies extended losses on Wednesday as uncertainties over inflation prompted investors to reduce exposure to riskier assets for now.
Also weighing on digital coins was a new Chinese ban on financial institutions providing services related to cryptocurrency transactions, reports agencies.MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.3 per cent though Hong Kong and South Korea are closed for holiday.
Mainland China’s CSI300 slipped 0.6 per cent while Japan’s Nikkei lost 1.1 per cent.
Wall Street stocks slid late in the session to end lower on Tuesday, unable to sustain gains made after bumper earnings from Walmart and Home Depot.
The S&P 500 lost 0.85 per cent, with telecom shares leading the decline, while the Nasdaq Composite dropped 0.56 per cent.
“Now that investors are pre-occupied with inflation, they are probably reluctant to make big decisions until they see a clearer picture,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
“Inflation worries will keep markets uncertain for now, even though I don’t expect stock prices to collapse given economic re-openings.”The Federal Reserve has stuck to the narrative that a recent rise in inflation would be transient and that it therefore should keep its easy monetary policy settings.
The minutes from the Fed’s April meeting, to be published late on Wednesday, are expected to repeat that message.
“Inflation remains the biggest theme, whether it is real and whether the Fed may need to change its policy because of that,” said Kazushige Kaida, head of forex sales at State Street Bank’s Tokyo branch. “At the moment, markets are putting faith, after a fashion, in the Fed’s narrative.”
Yet an unexpected pickup in consumer inflation and signs of a labour shortage in the United States have prompted investors to dump assets that had risen sharply over the past year.
Cryptocurrencies are one such extreme case.
Bitcoin dropped as much as 5.3 per cent to hit its lowest level since early February and last stood at $40,973, having lost more than a third of its value from a peak of $64,895 hit just over a month ago.