Asian shares were mostly higher on Thursday after a highly anticipated report showed inflation accelerated across the U.S. in August, but not by much more than expected. The subdued increase in prices eased worries over the likelihood of another interest rate hike by the Federal Reserve, leading Tokyo’s Nikkei 225 to surge 1.2% to 33,104.791. However, Hong Kong’s Hang Seng lost 0.3% to 17,970.01 and the Shanghai Composite index sank 0.9% to 3,109.88 amid concerns over China’s regulatory crackdown on technology and gaming sectors2. South Korea’s Kospi jumped 1.3% to 2,667.03, boosted by strong earnings from Samsung Electronics and LG Electronics3. Australia’s S & P/ASX 200 gained nearly 0.4% to 7,436.70, supported by higher commodity prices and positive consumer sentiment data4.
The U.S. inflation report showed that consumer prices rose 0.3% in August from July, slightly lower than the 0.4% increase that economists had expected. The annual inflation rate eased slightly to 5.3% from 5.4% in July, still well above the Fed’s target of 2%. The report suggested that inflation pressures may be moderating as supply chain disruptions ease and demand cools down after the pandemic-induced surge1.
The market reaction to the inflation data was mixed, as some investors saw it as a sign that the Fed may delay tapering its bond-buying program, while others remained cautious about the possibility of higher interest rates in the future. The Fed is expected to announce its policy decision next week, which could have a significant impact on global markets1.
The Asian stock market performance also reflected the diverging economic outlooks among different countries in the region, as some are recovering faster from the pandemic than others. Japan’s economy grew at an annualized rate of 1.9% in the second quarter, beating expectations and rebounding from a contraction in the first quarter3. South Korea’s economy expanded by 6% year-on-year in the second quarter, the fastest pace since 2010, driven by robust exports and domestic demand3. However, China’s economy slowed down in August, as retail sales, industrial production and fixed-asset investment all missed forecasts, indicating that the Delta variant outbreak and regulatory tightening have weighed on growth2. Hong Kong’s economy also contracted by 1.2% quarter-on-quarter in the second quarter, as social distancing measures and travel restrictions dampened activity2.