Overnight on Wall Street, technology stocks were among the biggest losers though the tech-focused Nasdaq (.IXIC) reversed the bulk of its early 2% decline over the course of the day. The Dow (.DJI) dropped 1.4% and the S&P 500 (.SPX) fell 0.9%. Shares in China opened in the red, with the blue-chip index (.CSI300) off 0.2%.Australian stocks slipped 0.6% while South Korea's KOSPI index (.KS11) skidded 0.7%. Japan's Nikkei (.N225) reversed early gains to be down 0.4%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) faltered 0.5%, after tumbling 1.6% on Tuesday for its biggest daily percentage drop since March 24.
Asian shares fell for a second straight session on Wednesday to one-month lows as investors speculated surging commodity prices and growing inflationary pressure in the United States could lead to earlier rate hikes and higher bond yields globally. The equity rout barely helped drive any safe haven flows into the greenback even as futures pointed to yet another negative open for Wall Street. E-mini futures for the S&P 500 nudged 0.3% lower in early Asian trading.
The U.S. Federal Reserve expects higher inflation though officials have pointed to transient factors and base effect for the temporary rise. Treasury yields have remained stuck to a tight range. The yield on benchmark 10-year Treasuries edged lower to 1.6235%, a far cry from the 2% level seen in before the coronavirus pandemic. The dollar was up 0.2% against the Japanese yen at 108.84 as it meandered in a narrow 107-110 band. The dollar index, which measures the greenback against six major currencies, was little changed at 90.297, after touching a two-month low of 89.979.The currencies of major natural resource suppliers such as Canada stood firm amid rising commodity prices. The loonie held near a 3-1/2-year high of C$1.2078. The Australian dollar , another proxy for commodity prices, was not far from a 10-week high of $0.7891 struck on Monday. Oil prices were lifted by fears of a gasoline shortage after a cyber-attack caused an outage at the largest U.S. fuel pipeline system. U.S. crude gained 17 cents to $65.45 a barrel. Brent crude added 15 cents to $68.70 per barrel. Spot gold was off at $1,829.9 an ounce.
Though there isn't a clear catalyst behind this purge. Apparently market is getting consolidated with combination of inflation fear and some market participants moving higher along the value spectrum, cutting their exposure to anything with a stretched valuation. It’s highly likely that sell-off would extend much further in a world of easy accommodative policy and fiscal largesse.