Asian Stocks Fall as US Inflation Worries Rise, Yen Hits 34-Year Low

Asian stock markets dropped on Thursday as concerns about persistent inflation in the United States overshadowed hopes of an interest rate cut by the Federal Reserve.

Key Points:

• Inflation Fears: Higher-than-expected US inflation data led investors to believe the Fed will be less likely to cut rates this year.
• Yen Weakens: The Japanese yen hit a 34-year low against the US dollar due to the widening interest rate differential.
• Regional Markets Down: MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%, and Japan’s Nikkei dropped 0.8%.
• China Stumbles: Chinese blue chips and Hong Kong’s Hang Seng index also declined after muted consumer price data.
• Fed Minutes: Recent Fed minutes revealed concerns among officials about inflation progress, potentially delaying rate cuts.
• Investor Expectations: Investors now see September as the earliest for the Fed to ease rates, with a 13% chance of no cuts this year.
• Central Bank Meetings: The European Central Bank meeting later today will be watched for clues on their future policy stance.
• Bond Yields Rise: Asian bonds followed the sell-off in US Treasuries, with Australian and Japanese yields jumping.
• Oil Prices Up: Oil prices remained slightly elevated after an Israeli strike in the Middle East raised concerns about supply disruptions.

Overall, the outlook for Asian markets is cautious as global investors grapple with the implications of persistent inflation and potential changes in central bank policy.

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