Asian Stocks Fall as Inflation Data Dims Fed Rate-Cut Hopes

Asian equities retreated on Wednesday after stronger-than-expected U.S. inflation data prompted investors to scale back expectations for Federal Reserve interest-rate cuts this year. The MSCI Asia Pacific Index slipped 0.2%, with notable losses in Australia’s S&P/ASX 200 and South Korea’s Kospi, while Japanese shares edged higher. U.S. equity futures also softened, with contracts on the S&P 500 and Dow Jones Industrial Average down about 0.2% following a more than 400-point drop in the cash Dow the previous session. Traders now assign only slightly better-than-even odds to a Fed rate reduction at the September meeting, compared with a clear majority view a month ago. The repricing followed Tuesday’s consumer price report showing headline inflation accelerated to 2.7% year on year in June, its fastest pace since February, amid early signs that recently imposed import tariffs are feeding through to goods prices. Treasury yields extended their rise, pushing the 30-year rate above 5% and holding the 10-year near 4.5%. In currency markets the yen and offshore yuan were little changed, while a firmer dollar weighed on several emerging-market units. Safe-haven flows helped bullion edge 0.2% higher. Investors will get another read on price pressures later in the day with the release of the U.S. producer price index.