Asian shares slip as inflation worries persist

Asian shares dropped on Thursday and the dollar strengthened slightly as investors considered US data indicating that progress in curbing inflation had halted, despite the economy’s resilience. Geopolitical concerns also weighed on risk sentiment.

The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4 per cent, with Japan’s Nikkei gaining 0.48 per cent. Sentiment remained fragile amid uncertainties surrounding potential trade disputes and ongoing geopolitical risks.

US consumer spending increased slightly more than expected in October, but progress in reducing inflation stalled. The lack of significant progress in bringing inflation back to the Federal Reserve’s two per cent target, coupled with potential tariff hikes, could limit the scope for future interest rate cuts.

While the Fed is still widely expected to deliver a third-rate reduction in December, minutes from the Federal Open Market Committee’s recent meeting revealed divisions among policymakers about the extent of further rate cuts.

In a surprising move, South Korea’s central bank cut interest rates for the second consecutive meeting, reflecting economic slowdown and slower-than-expected inflation. The Korean won weakened following the decision.

The Japanese yen declined 0.29 per cent to 151.53 per dollar, but it remained close to its one-month high. The yen is poised for its strongest weekly performance since early September as expectations grow for a rate hike from the Bank of Japan next month.

Oil prices stabilised as concerns over Middle East supply disruptions eased after a ceasefire agreement between Israel and Hezbollah.

Brent crude futures were little changed at $72.8 a barrel, and US West Texas Intermediate crude held steady at $68.7.

Spot gold was flat at $2,634 per ounce, but it was on track for a nearly four per cent decline in November, its weakest monthly performance in over a year.

Attribution: Reuters

Subediting: M. S. Salama