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Asian stocks decline after US inflation edges higher

BEIJING (AP) – Asian stock markets declined yesterday after United States (US) inflation edged higher, fueling unease about the outlook for the biggest global economy.

Shanghai, Hong Kong and Sydney declined. Japanese markets were closed for a holiday. Oil prices edged lower.

Wall Street’s benchmark S&P 500 index gained less than 0.1 per cent after government data showed consumer prices rose 3.2 per cent in July. That was higher than the previous month but below forecasts.

Traders hope the data will persuade the Federal Reserve (Fed) that inflation that peaked above nine per cent last year is under control and no more interest rate hikes are needed.

“As benign as the inflation report was initially interpreted, investors quickly shifted concerns to factors that could disrupt the narrative, such as scorchingly high energy and food prices,” said Stephen Innes of SPI Asset Management in a report.

The Shanghai Composite Index lost 0.7 per cent to 3,231.05 and the Hang Seng in Hong Kong fell 0.6 per cent to 19,131.11.

The Kospi in Seoul gained less than 0.1 per cent to 2,602.31 while Sydney’s S&P-ASX 200 sank 0.2 per cent to 7,344.60.

Bangkok gained while New Zealand and other Southeast Asian markets declined.

The KEB Hana Bank headquarters in Seoul, South Korea. PHOTO: AP

On Wall Street, the S&P 500 rose to 4,468.83 for its second daily gain in the past eight days.

The Dow Jones Industrial Average gained 0.2 per cent to 35,176.15. The Nasdaq composite added 0.1 per cent to 13,737.99.

US inflation in July was up from the previous month’s three per cent but below forecasts of 3.3 per cent.

Beneath the surface, underlying trends for inflation were also within expectations. The readings bolstered hopes among investors that the Fed’s anti-inflation campaign worked and no more rate hikes are needed.

They hope the Fed can achieve a soft landing by cooling inflation without tipping the economy into recession. Critics say Wall Street might have latched too early onto a belief that inflation is under control and the Fed’s rate-hiking cycle is finished.

The Fed has said its decisions on possible additional increases will be based on inflation, hiring and other data.

Thursday’s report likely gives the Fed a reason to hold rates steady at its next meeting in September, according to Head of iShares Investment Strategy, Americas Gargi Chaudhuri.

More reports on inflation and hiring are due out before the Fed’s next meeting that ends September 20. Also on Thursday, the government reported slightly more workers applied for unemployment benefits last week than expected.

That might help to reassure the Fed that hiring, which has stayed unexpectedly strong, isn’t contributing to upward pressure on prices.

Big US companies, meanwhile, are reporting mostly better profits than expected.

The Walt Disney Co rose 4.9 per cent after saying it would raise prices for some of its streaming services in hopes of boosting profitability.

The entertainment giant reported stronger profit for the spring than analysts expected but weaker revenue. Capri Holdings, which owns the Michael Kors, Versace and Jimmy Choo brands, soared 55.7 per cent after Tapestry, the company behind luxury handbag and accessories retailer Coach, said it was buying the company for roughly USD8.5 billion.

The deal would put it in better position to take on big European rivals such as LVMH. Tapestry fell 15.9 per cent.

In the bond market, the yield on 10-year Treasury debt rose to 4.09 per cent from 4.01 per cent late Wednesday.

The two-year Treasury yield, which moves more on expectations for the Fed, ticked up to 4.81 per cent from 4.80 per cent late Wednesday.

In energy markets, benchmark US crude lost six cents to USD82.76 per barrel in electronic trading on the New York Mercantile Exchange.

The contract fell USD1.58 on Thursday to USD82.82. Brent crude, the price basis for international oil trading, lost five cents to USD86.35 per barrel in London. It declined USD1.15 the previous session to USD86.40.

The dollar was unchanged at JPY144.72. The euro held steady at EUR1.0990.