Asian shares slip on jitters over inflation, interest rates

The US House of Representatives is likely to vote on President Joe Bidens proposed stimulus package by the end of the week.It would include USD 1,400 checks to most Americans, additional payments for children, and billions of dollars in aid to state and local governments as well as additional aid to businesses impacted by the pandemic.In other trading, US benchmark crude oil lost 41 cents to USD 61.26 per barrel in electronic trading on the New York Mercantile Exchange.

Shares fell Wednesday in Asia as investors weighed the possibility that inflation might prompt central banks to adjust their ultra-low interest rate policies, despite reassurances from the chair of the Federal Reserve. Hong Kong led the decline, losing 2.7 per cent to 29,809.43. Tokyo's Nikkei 225 shed 1.6 per cent to 29,671.70. In Seoul, the Kospi skidded 2.5 per cent to 2,994.98. Australia's S&P/ASX 200 lost 0.9 per cent to 6,777.80. The Shanghai Composite index gave up 2 per cent to 3,564.44.

India's Sensex bucked the regional trend, gaining 0.4 per cent to 49,960.05. Singapore also gained while other regional benchmarks declined. Hong Kong's government announced pandemic relief measures worth $15.4 billion to help the territory recovery from the blow to its economy, which contracted 6.1% last year. The measures include loans for the unemployed, consumption vouchers and tax relief. Hong Kong Finance Minister Paul Chan forecast the economy is set to grow 3.5% to 5.5 per cent this year. Investors remain increasingly focused on a big tick up in bond yields and how it affects stock valuations. The large amount of stimulus being pumped into economies has been a factor in pushing bond yields higher, giving some investors pause as it revives worries about inflation that have been nearly nonexistent for more than a decade. The yield on the 10-year Treasury note, which has climbed recently, was steady at 1.33 per cent on Wednesday. When bond yields rise, stock prices tend to be negatively impacted because investors turn an increasingly larger portion of their money toward the steadier stream of income that bonds provide. Federal Reserve Chair Jerome Powell told Congress Tuesday the Fed didn't see a need to alter its policy of keeping interest rates ultra-low, noting that the economic recovery “remains uneven and far from complete.” The message seemed to be muted in Asia. “Rising borrowing costs remain the prevalent issue on hand though Fed Powell's dovish remarks had helped to arrest the fall for US equities on Tuesday,'' Jingyi Pan of IG said in a commentary.

However, “Despite reassuring comments on lower rates from the U.S. Federal Reserve chair Jerome Powell, Asia markets continued to look to concerns with regards to the rising bond yields,'' Pan said. A late-afternoon burst of buying on Wall Street on Tuesday helped reverse most of a tech-focused sell-off, nudging the S&P 500 to its first gain after a five-day losing streak.

The benchmark index eked out a 0.1 per cent gain, to 3,881.37. The Dow Jones Industrial Average also rose 0.1 per cent, to 31,537.35. The Nasdaq lost 0.5 per cent to 13,465.20. The indexes were at all-time highs less than two weeks ago.

Smaller company stocks fell more than the broader market. The Russell 2000 small-cap index slid 0.9 per cent, to 2,231.21. The index, the biggest gainer so far this year, clawed back from a 3.6 per cent slide.

Since the pandemic began, investors have pushed prices of Big Tech stocks to stratospheric heights, betting that quarantined consumers would do most of their shopping online and spend more on devices and services for entertainment.

The bet mostly paid off. But the pandemic may be reaching its end stages, with millions of vaccines being administered each week in the US and across the globe now. It may cause consumers to return to their pre-pandemic habits.

More broadly, investors remain focused on the future of global economies badly hit by COVID-19 and the potential for more stimulus to fix them. The US House of Representatives is likely to vote on President Joe Biden's proposed stimulus package by the end of the week.

It would include USD 1,400 checks to most Americans, additional payments for children, and billions of dollars in aid to state and local governments as well as additional aid to businesses impacted by the pandemic.

In other trading, US benchmark crude oil lost 41 cents to USD 61.26 per barrel in electronic trading on the New York Mercantile Exchange. It lost 3 cents on Tuesday to USD 61.67 per barrel. Brent crude, the international standard, lost 24 cents to USD 64.24 per barrel. The US dollar rose to 105.49 Japanese yen from 105.24 yen late Tuesday. The euro climbed to USD 1.2155 from USD 1.2150.