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Asian stocks sink as rate jitters mount ahead of CPI data, Fed

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Investing.com– Most Asian stocks fell on Wednesday as anticipation of more cues on inflation and the Federal Reserve weighed, while reports of more U.S. trade scrutiny against China also dented sentiment. 

Regional stocks took few positive cues from record-high closes on the S&P 500 and the NASDAQ Composite, which were buoyed chiefly by strength in heavyweight technology stocks. U.S. stock futures moved little in Asian trade.

Chinese stocks slip, reports flag more U.S.-China trade woes 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell about 0.2% each, while Hong Kong’s Hang Seng slid 1.6% and was the worst performer among Asian indexes.

Reports said that the U.S. was considering wider trade sanctions on semiconductor exports to Russia, and could potentially target Chinese and Hong Kong chip resellers who are potentially supplying Moscow.

The increased U.S. scrutiny towards Chinese companies drummed up concerns over worsening trade ties between the world’s biggest economies. The U.S. had earlier in 2024 rolled out increased import tariffs on several major Chinese industries. 

Mixed Chinese inflation data also presented middling cues on the economy. While producer price index inflation shrank at its slowest pace in 15 months in May, consumer price index inflation grew less than expected. 

Other Asian markets also fell. Japan’s Nikkei 225 and TOPIX indexes fell about 0.8% each, after PPI inflation read hotter than expected for May. 

The reading came just days before a Bank of Japan meeting, where the central bank is widely expected to tighten policy further by scaling back some of its bond purchases.

The higher PPI reading also tied into the BoJ’s outlook that inflation will pick up this year, giving the bank more impetus to raise interest rates further. 

Australia’s ASX 200 fell 0.5%, while South Korea’s KOSPI was an outlier among its peers, rising 0.3% on some strength in chipmaking stocks. 

Futures for India’s Nifty 50 index pointed to a flat open after the index notched new record highs this week. The Nifty largely shrugged off the impact of a surprise result for the 2024 general election, which saw a BJP-led alliance clock a smaller majority.

But Prime Minister Narendra Modi’s cabinet appointments, revealed this week, showed that his plans for economic reforms remained on track.

Fed rate decision, CPI in focus 

Broader sentiment remained fragile before the conclusion of a two-day Fed meeting later on Wednesday, where the central bank is widely expected to keep rates unchanged.

But its outlook on inflation and plans for rate cuts will be closely watched.

Before the Fed meeting, key CPI data is also due on Wednesday, and is expected to show inflation remained sticky in May, giving the Fed little impetus to begin trimming rates. 

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