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Investing.com – Most Asian stocks fell sharply on Friday after a stronger-than-expected Bank of England interest rate hike fueled concerns about tightening, while a rise in Japanese consumer inflation also hit sentiment.
In addition to the , risk-oriented assets, some who testified before Congress that the bank could raise rates at least twice more this year were also hit.
The two factors fueled concerns about tightening global monetary policy and led investors to sell off largely risk-oriented, interest-rate-sensitive assets.
Hong Kong was the worst performer in Asia, down 1.8% in catch-up trading after a holiday on Thursday. Broader Chinese markets were closed on the day but closed lower on Wednesday following an IPO in the country.
South Korea’s figures fell 0.7% and Australia’s 1.1%, although data showed some improvement in manufacturing and services activity through June.
Japanese stocks slide after inflation rises more-than-expected
The Japanese index fell 1.7% while falling 1.5% after data showed inflation rose more-than-expected in the 12 months to May.
While core inflation was lower month-on-month, inflation excluding food and fuel costs rose to a 42-year high in May, suggesting underlying Japanese inflation remained elevated.
The trend suggests that pressure is mounting on the Bank of Japan to tighten monetary policy, even as the bank reiterated that it has no plans to change its ultra-loose monetary policy in the near future.
High inflation could also possibly offset the recent resilience of the Japanese economy, which has in part led to large numbers of foreign purchases of local stocks.
Investors used high inflation as a catalyst to lock in recent gains in the Japanese market. Both the Nikkei and TOPIX had risen to 33-year highs earlier in the week.
Indian stocks are likely to fall further from their record highs
The index for India pointed to a weak open for local stocks after both the Nifty and Nifty tumbled from record highs on Thursday.
While optimism about the relative strength of India’s economy led to plenty of foreign buying in the local markets, analysts recently warned that small and mid-cap stocks could see some correction given their high valuations in a weak global economic environment.
Fears of a resurgence in retail inflation in India also came into play after a delay in the Indian monsoon.