On Friday, most Asian stocks experienced sharp declines amidst growing concerns about higher inflation rates, fueled by hotter-than-expected U.S. inflation readings. Investors also turned their attention to upcoming central bank meetings.
Following a weak performance on Wall Street, where the producer price index inflation surpassed expectations in February, regional markets reacted negatively. The unexpected rise in inflation prompted traders to reassess their expectations for a rate cut in June.
As anticipation builds for the Federal Reserve meeting next week, fears of potentially more hawkish signals from the central bank led to a slight decline in Wall Street futures during Asian trading hours.
In Japan, the Nikkei 225 index fell by 0.3% on Friday, signaling a 2.3% weekly decline, while the TOPIX rose by 0.6%, but was on track to lose nearly 2% for the week. Investors continued to lock-in profits from record highs reached last week ahead of the Bank of Japan meeting next week. Speculation mounts that the central bank might signal an end to its negative interest rates and yield curve control policies, fueled by signs of persistent Japanese inflation and substantial increases in wages.
Meanwhile, Australia’s ASX 200 dropped by 1%, driven by heavy profit-taking after hitting a record high earlier in the week. Investors opted to take profits ahead of the Reserve Bank of Australia meeting next week. The central bank is expected to maintain its hawkish stance given the inflation rate remaining above its 2% annual target. Analysts anticipate the RBA to maintain a “mild tightening bias” next week, with a shift to a neutral policy stance expected by May.