Asian Shares Retreat On Inflation, Interest Rate Concerns

(RTTNews) - Asian stocks fell sharply on Wednesday as escalating U.S.-Iran tensions pushed oil prices and global bond yields higher.

The U.S. dollar was steady near a two-week high while gold prices fell toward $4,300 an ounce after Federal Reserve Governor Michael Barr said in a speech that he would back a rate hike if inflation doesn't cool quickly.

According to the CME FedWatch tool, the chance of a quarter-point rate hike at the Fed's September 15-16 meeting now stands at 68.2 percent.

With inflation still running above the Fed's 2 percent target, Friday's U.S. payrolls report along with the release of August CPI data on September 11 may offer additional clues on the Fed's rate trajectory going forward.

Brent crude futures rose toward $95 a barrel, extending gains for a third consecutive session to the highest level in nearly six weeks as escalating fighting between the U.S. and Iran heightened concerns over further disruptions to energy flows through the Strait of Hormuz.

Tehran launched missile and drone attacks towards U.S.-linked sites in Bahrain, Jordan and Kuwait in defiance of a warning from U.S. President Trump that any retaliation would see Iran "hit much harder" and that the U.S. is still holding out on "the biggest attack of them all."

China's Shanghai Composite index dropped 0.97 percent to 3,941.39 after Beijing introduced measures to reduce developers' reliance on presale funds. Hong Kong's Hang Seng index finished marginally lower at 25,311.21.

At the G20 meeting, U.S. Treasury Secretary Scott Bessent slammed China's export-driven economic model and confirmed that "the country with the world's largest and unsustainable current account surplus" was the sole dissenter from his chairman's statement.

Japanese markets tumbled on concerns over the U.S.-Iran war and rising energy costs.

The Nikkei average fell 2.85 percent to 64,325.64, extending losses for a third consecutive session. The broader Topix index closed 2.40 percent lower at 4,081.60. Tech stocks paced the decliners, with SoftBank Group losing 6.4 percent and Advantest falling 2.5 percent.

Sumitomo Metal Mining plummeted 11.6 percent after gold prices hit a four-week low amid hawkish Federal Reserve expectations.

Seoul stocks plunged in a broad market sell-off in the wake of oil-driven inflation fears. The Kospi index plummeted 3.99 percent to 6,562.72 as finance minister nominee Lee Hyoung-il vowed to make price stability a top priority.

Market bellwether Samsung Electronics tumbled 4 percent and its chip-making rival SK Hynix gave up 4.7 percent while automaker Hyundai Motor slumped 5.6 percent.

Australian markets fell sharply on expectations of an RBA rate hike later this month as Q2 GDP data beat forecasts and the 10-year government bond yield hit a five-month high above 5.1 percent amid a broad selloff in global bond markets.

The benchmark S&P/ASX 200 dipped 0.97 percent to 8,978.40, extending losses for a third consecutive session. The broader All Ordinaries index settled 1.09 percent lower at 9,160.30.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 index rallied 1.04 percent to 13,930.57 after the Reserve Bank of New Zealand raised its key interest rate for a second straight meeting, and warned that risks for higher inflation remain in play for the economy.

Overnight, U.S. stocks closed lower for the third straight day while the yield on the benchmark ten-year note hit a 20-month high amid increased tensions in the Middle East.

Crude oil prices spiked after U.S. Central Command announced a fresh wave of attacks against IRGC targets, citing Tehran's attempts to lay mines in the Strait of Hormuz and an earlier attack on a U.S. military base.

Tehran warned it would prevent oil exports from the Gulf, adding to uncertainty around energy supplies.

Economic data offered little relief, with U.S. manufacturing activity easing in August, job openings in July coming in softer than expected, and residential construction spending declining in the month.

The tech-heavy Nasdaq Composite lost 1 percent, the Dow shed 0.8 percent and the S&P 500 declined 0.7 percent.