HONG KONG- Asian shares declined on Tuesday as Wall Street retreated on worries about accelerating inflation, prompting investors to cut back on their exposure to growth-focused stocks on bets of higher interest rates in the not-too-distant future.
A host of Federal Reserve speakers this week will likely give markets plenty to consider as policymakers assess how best to respond to receding risks posed by the coronavirus in some major economies.
A test case on US inflation will come this week when the Labor Department releases its latest consumer price index report on Wednesday.
“Markets reversed course overnight as inflation fears drove investors away from growth stocks, notably the tech stocks, to pick cyclicals,” said Hong Hao, head of research at BoCom International.
“The Asian markets today will follow the US trend and several Chinese tech stocks will in particular be under big pressure due to the pending antitrust penalty,” he said.
In early trade, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.7 percent, with Australian stocks off 1.2 percent and Tokyo’s Nikkei 2.63 percent lower.
China’s blue-chip CSI300 index fell 0.77 percent in morning trade, while Hong Kong’s Hang Seng index opened down 2 percent.
Overnight, Wall Street closed lower as inflation jitters drove investors away from market-leading growth stocks in favor of cyclicals, which stand to benefit most as the economy gathers momentum.
The Dow Jones Industrial Average pulled back from record highs hit earlier in the US day.
The S&P 50 extended losses to 1 percent, and the tech-heavy Nasdaq Composite fell 2.55 percent.
