Global stocks rebound from inflation concerns

Asia-Pacific equities rallied as global markets rebounded from a bout of volatility caused by inflation fears.

The Topix in Japan rose 1.8 per cent on Friday, while Hong Kong’s Hang Seng added 1 per cent. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks was 1.7 per cent higher and Australia’s S&P/ASX 200 jumped 1 per cent.

The gains marked a turnround from weakness in Asian markets on Thursday on the back of this week’s US inflation data, which showed consumer prices rose at their fastest pace in 13 years in April.

That reading, which exceeded economists’ expectations, pushed stocks on Wall Street to their worst day in months on Wednesday. But US stock benchmark, the S&P 500, bounced back to close 1.2 per cent higher the following day.

The yield on the 10-year US treasury was little changed at 1.654 per cent during Asian trading on Friday after falling 0.04 percentage points in the US overnight.

Futures for the S&P 500 rose 0.5 per cent while those for London’s FTSE 100 were 0.7 per cent higher.

Global markets have been tense as investors and policymakers watch for signs of higher inflation against the backdrop of a global economic recovery from the coronavirus pandemic.

That has prompted fears among investors that the US economy could be overheating following fiscal support and that the Federal Reserve may be forced to tighten monetary policy.

“While interest rates are likely to remain accommodative in the near-term, inflationary pressures are likely to warm as the US economy continues to recover back to normalised levels,” said David Chao, a global market strategist at asset manager Invesco. “The Fed could be forced to react sooner rather than later.”

Commodities, which have rallied significantly in recent weeks, weakened on Friday. Brent crude, the international oil benchmark, was down 0.5 per cent to $66.70 per barrel. US marker West Texas Intermediate dropped 0.5 per cent to $63.50 per barrel.

The Colonial pipeline, a critical US fuel artery, resumed operations on Wednesday after being shut down late last week by a cyber attack.

Gold, which is viewed by some investors as a hedge against inflation, lost 0.3 per cent to trade at $1,821.8 per ounce.

Additional reporting by Daniel Shane in Hong Kong