Asian stocks fall to near 1-year lows as oil rally fuels inflation fears
Asian shares tracked a broad sell-off on Wall Street to weaken for a third straight session on Tuesday, as investors feared oil prices hitting multi-year highs would add to inflationary pressures caused by supply chain disruptions.
U.S. and European stock futures edged up, with S&P 500 e-minis rising 0.01%, the pan-region Euro Stoxx 50 futures gaining 0.2 and FTSE futures gaining 0.4%.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) dropped as much as 1.3%, declining for a third consecutive session. Japan stocks (.N225) were down 2.5%, South Korea (.KS11) gave up 2% and Australia (.AXJO) shed 0.4%.
“Investors are clearly worried about inflation due to supply chain disruptions and the rally in energy prices,” said Vasu Menon, executive director of investment strategy at OCBC Bank.
The drop in markets took MSCI’s main benchmark to 619.77, the lowest since November 2020 but it pared losses to be down 0.6% in late Asia trade. The index has shed more than 5% this year, with Hong Kong and Japanese markets among the big losers.
“We have seen tech stocks outperform value stocks, so if inflation remains a worry, then tech stocks tend to get hit,” Menon said.
Oil prices reached three-year peak on Monday after OPEC+ confirmed it would stick to its current output policy as demand for petroleum products rebounds, despite pressure from some countries for a bigger boost to production.
Underscoring the rise in commodity prices, the Refinitiv/CoreCommodity CRB index (.TRCCRB) rose to 233.08 on Monday, the highest in more than six years. U.S. oil was steady at $77.68 a barrel, a day after hitting its highest since 2014. Brent crude stood at $81.5 after rising to a three-year top.