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Asian stocks dip as investors brace for US inflation data

Asian stock markets fell on Wednesday as investors braced for the latest US inflation data, which is expected to set the pace of future monetary tightening by the Federal Reserve.

Hong Kong’s Hang Seng index lost a staggering 2.2 percent, while China’s CSI 300 benchmark of shares listed in Shanghai and Shenzhen fell to 1 percent. The Japanese Topix fell 0.3 percent.

US consumer price index inflation reached 9.1 percent in June, the highest level in 40 years, which the central bank has met with successive rate hikes of 0.75 percentage points.

Economists expect a month-on-month inflation rate of 0.2 percent and a year-on-year rate of 8.7 percent. Markets estimate the possibility of another 0.75 percentage point gain at the Fed’s next policy meeting in September.

In government bond markets, the yield on the two-year US Treasury bill, which moves in line with interest rate expectations, fell 0.02 percentage point to 3.27 percent. The yield on the 10-year bond, which moves with inflation and growth expectations, was 0.01 percent lower to 2.79 percent. Yields move inversely to bond prices.

“Market attention is moving between slowing growth and over-inflation,” Citi analysts wrote, adding that a stronger inflation measure “will make the market — and possibly Fed officials — think about a 100 [basis point] walk or a 75 bp in September, followed by another in November”.

Wednesday’s market moves followed the release of Chinese inflation data, which showed consumer prices rose 2.7 percent year-on-year in July, less than expected, and 0.5 percent compared to the previous month.

The tech sector led the declines for stocks, with the Hang Seng Tech Index dropping a whopping 3.1 percent. The biggest declines were for electric car makers Nio, Xpeng and Li Auto, which lost 7.2 percent, 6.6 percent and 6.9 percent, respectively.

Oil prices fell on Wednesday, with the international benchmark Brent oil losing 0.3 percent to trade at $96.01 a barrel and the US marker West Texas Intermediate 0.4 percent lower at $90.16.

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