Asian Shares Retreat On Powell’s Inflation Remarks

Asian stocks fell on Friday as treasury yields spiked in reaction to the latest comments from Federal Reserve Chair Jerome Powell indicating that he expects some inflationary pressures in the time ahead.

China’s Shanghai Composite Index fluctuated before finishing marginally lower at 3,501.99, as the country set a conservative economic growth target of above 6 percent for 2021, well below what economists had forecast, and outlined fiscal support for the economic recovery.

Hong Kong’s Hang Seng Index dropped 138.50 points, or 0.5 percent, to 29,098.29 after reports that Beijing plans a major overhaul of the city’s electoral system to ensure “patriots” are in charge.

Japanese shares ended lower for the second straight day, with index heavyweights and technology shares bearing the brunt of the selling on concerns over rising U.S. bond yields.

The Nikkei 225 Index dipped 65.79 points, or 0.2 percent, to 28,864.32 as the government extended the Covid-19 related state of emergency by two weeks for the Tokyo region to prevent a fresh wave of infections. The broader Topix closed 0.6 percent higher at 1,896.18, recovering from an early slide.

Fast Retailing, the operator of Uniqlo clothing stores, gave up 3.4 percent, while Tokyo Electron and Advantest fell 2.5 percent and 1.3 percent, respectively in the tech sector. Toshiba surged 6 percent after Mizuho Financial Group built a 5.1 percent stake in the energy and infrastructure services firm.

Australian markets fell for a second straight session after Powell disappointed some traders by offering few signs of expanding monetary stimulus.

The benchmark S&P/ASX 200 Index slid 49.90 points, or 0.7 percent, to 6,710.80, while the broader All Ordinaries Index ended down 57.60 points, or 0.8 percent, at 6,943.

Tech shares followed their U.S. peers lower, with Afterpay losing 2.5 percent and WiseTech Global giving up 1.9 percent.

Mining heavyweights BHP and Rio Tinto fell 2-3 percent, while lithium-boron supplier Ioneer slumped 13.6 percent after a discounted share placement.

Woodside Petroleum, Oil Search and Santos jumped 3-5 percent after crude prices hit a more than one-year high overnight. Gold miners finished broadly lower after gold prices hit a nine-month low.

In economic news, a survey showed the services sector in Australia expanded in February, with a seasonally adjusted Performance of Service Index score of 58.8, the highest reading since June of 2018.

Seoul stocks hit a one-month low before ending off their worst levels. The benchmark Kospi fell as low as 2,982.45 before regaining some ground to end the session down 17.23 points, or 0.6 percent, at 3,026.26. Samsung SDI gave up 1 percent, SK Hynix dropped 1.4 percent and Naver tumbled 3.6 percent.

New Zealand shares ended lower as rising bond yields weighed on utilities. A disappointing debut for My Food Bag also dented sentiment.

Heavyweights Meridian Energy and Contact Energy fell 6.4 percent and 4.1 percent, respectively, while the benchmark NZX-50 index dropped 44.25 points, or 0.4 percent, to 12,180.25. Dairy producer Fonterra rose 1.2 percent after lifting the farm gate milk price forecast.

U.S. stocks tumbled overnight as treasury yields spiked in reaction to comments by Powell suggesting that the reopening of the economy could “create some upward pressure on prices.”

The Fed chief, however, said he expects the increase in inflation to be “transitory” and stressed there is “a lot of ground to cover” before price growth reaches a sustainable level above the Fed’s 2 percent target.

The Dow Jones Industrial Average and the S&P 500 slumped 1.1 percent and 1.3 percent, respectively to their lowest closing levels in a month, while the tech-heavy Nasdaq Composite index plunged 2.1 percent to a two-month closing low.

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