MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.7% with some of the largest losses in Australia
Asian shares dropped and bond yields rose on nervousness about inflation on Thursday, while the yen’s decline past 160-per-dollar had currency traders bracing for Japan to step in and stabilise it.
The dollar made six-week highs on sterling and the kiwi and at 160.4 yen traded just short of Thursday’s 38-year high. The jittery mood had frothy sectors of financial markets especially vulnerable and Nasdaq futures declined 0.4%.
Shares in bellwether chipmaker Micron Technology slipped 8% in U.S. after-hours trade as it met rather than topped high revenue expectations. Japan’s Nikkei dropped 1%.
FTSE futures and European futures were down 0.2%.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.7% with some of the biggest losses in Australia where rate sensitive stocks dipped following Wednesday’s data showing a surprise jump in inflation.
Australia’s inflation is broadly at the highest levels in the developed world now, said CommSec senior economist Ryan Felsman, with the market re-pricing risks of further hikes.
Australian three-year government bond yields had jumped 18 bps on Wednesday, after inflation rose to a six-month high in May, and increased another 7 basis points on Thursday to 4.18%, tracking an overnight sell-off in U.S. Treasuries.
Swaps markets price nearly a 40% probability Australia’s central bank hikes rates by 25 basis points in August, up from almost 10% before the inflation surprise.
Australia’s inflation surprise also follows a similarly unexpected rise in Canadian inflation as markets awaited the next figures of the Fed’s preferred measure of U.S. inflation on Friday.
Later on Thursday final U.S. gross domestic figures, European confidence figures, a speech from Australia’s deputy central bank governor, and a rates decision in Sweden will be in focus.
