SYDNEY- Asian shares fell after Wall Street wobbled overnight with markets bracing for key US inflation data on Wednesday, while an oil price spike stoked anxiety about persistent price pressures, complicating the interest rate outlook.
The euro was supported by a hawkish shift in expectations for the European Central Bank on Thursday, with bets now favoring a hike, after a Reuters report that the ECB expects inflation will stay above 3 percent next year in its updated forecasts.
Europe is set to open lower, with EUROSTOXX 50 futures falling 0.5 percent . Both S&P 500 futures and Nasdaq futures were mostly unchanged.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.3 percent while Tokyo’s Nikkei eased 0.1 percent .
Chinese blue-chips dropped 0.7 percent on still-fragile sentiment about the outlook for the world’s second largest economy. Hong Kong’s Hang Seng index reversed earlier gains to be mostly flat.
At the forefront of markets’ minds is the crucial US Consumer Price Index (CPI) report expected on Wednesday, which should shed further light on the inflation outlook and provide some clarity about whether the Federal Reserve is done tightening.
While core CPI is seen cooling to 4.3 percent year-on-year in August from 4.7 percent , rising energy costs are forecast to keep headline inflation elevated at 3.6 percent . And the latest spike in oil prices to ten-month highs is unlikely to escape the Fed’s attention.
“What’s happening with oil and headline inflation is still too soon for the Fed to be signaling the all clear as far as the risks of some incremental tightening before they’re done,” said Ray Attrill, a currency strategist at National Australia Bank.
“When you have those sort of volatility in the food and energy components, the worry is that if it’s persistent then it does tend to bleed into core inflation measures over time.”
Oil prices extended gains on Wednesday. Brent crude futures settled 0.3 higher at $92.31 per barrel, nearing a ten-month peak that it hit a session ago, while US West Texas Intermediate crude futures were up 0.3 percent at $89.13.
