Asian stocks follow Wall Street after Fed inflation report

TOKYO – Asian stock markets followed Wall Street’s decline on Thursday after the US Federal Reserve said US inflation was too high, suggesting support for more aggressive rate hikes.

Shanghai, Tokyo, Hong Kong and Sydney declined. Oil prices rose slightly.

Wall Street’s benchmark S&P 500 index slipped 0.7% on Wednesday after records from the Fed’s July 26-27 board meeting showed that members still thought inflation was “unacceptably high” despite signs of a signs of a slowdown in US economic growth. The board saw “little evidence” of inflationary pressures easing.

Investors fear that aggressive rate hikes by the Fed and central banks in Europe and Asia to stem inflation, which is at multi-decade highs, could hurt global economic growth.

The Fed’s notes raised “the prospects of further tightening” even as the pace of rate hikes slows, while other investors see possible “excessive tightening slowing growth,” Mizuho Bank’s Venkateswaran Lavanya said in a report.

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The Shanghai Composite Index slipped 0.5% to 3,274.83 and Tokyo’s Nikkei 225 fell 0.9% to 28,963.16. Hong Kong’s Hang Seng lost 0.7% to 19,776.99.

Seoul’s Kospi slipped 0.4% to 2,506.26 and Sydney’s S&P-ASX 200 fell 0.3% to 7,105.10.

India’s Sensex opened up 0.2 to 60,161.37. New Zealand and Bangkok fell while Singapore and Jakarta rose.

On Wall Street, the S&P 500 fell to 4,274.04. The loss erased weekly gains, sending the index down 0.1% since Monday.

The Dow Jones Industrial Average was down 0.5% at 33,980.32 and the Nasdaq was down 1.3%. to 12,938.12.

The Commerce Department reported that retail sales were flat in July month-on-month, defying forecasts of a slight increase. Retailers have warned that high inflation will discourage consumers from spending on unnecessary items.

Retail chain Target fell 2.7% after reporting a nearly 90% fall in profit in the second quarter. Children’s clothing and accessories chain Children’s Place fell 11% after reporting a surprise loss on supply problems and inflationary pressures.

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Technology and communications stocks also fell.

Wednesday’s Fed notes made it clear that the board plans to raise rates further, but gave no indication of when or by how much.

The US Federal Reserve has raised interest rates twice this year by 0.75 percentage points, three times the usual range. Forecasts say another hike of the same magnitude is possible at the Fed’s September meeting, although the likelihood has diminished as data shows the economy is slowing.

In energy markets, the reference price for US crude rose 3 cents to $88.14 a barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, it rose $1.58 to $88.11. Brent crude, the price basis for international trade, was up 1 cent in London to $93.66 a barrel. In the previous session, it rose $1.31 to $93.65.

The dollar rose to 135.10 yen from 135.05 yen on Wednesday. The euro rose to $1.0172 from $1.0169.