Asian markets slip as inflation fears trump recovery hopes

Asian markets mostly fell Thursday on profit-taking and growing worries about inflation, which offset long-running optimism about the global recovery as vaccines are rolled out, infection rates slow and Joe Biden's stimulus winds through Congress.

Oil prices pushed further up to 13-month highs as the severe cold snap in the United States hammers production, even trumping news that Saudi Arabia is planning to up output in light of the commodity's strong performance in recent months. Confidence that the world economy will enjoy a scorching rebound from last year's collapse has fired global equities and other risk assets for months as immunisation programmes allow people to slowly get back to a semblance of normality and lockdowns are eased.

Underpinning that has been vast amounts of government spending as well as ultra-loose central bank monetary policies and pledges of continued support until the recovery is well underway.

But that has led to expectations of a surge in inflation and a spike in US Treasury yields to around one-year highs, sparking worries of higher borrowing costs down the line. And it is these fears, along with warnings equities may have run ahead of themselves, that are playing on investors' minds.

Those concerns were allayed by a forecast-beating jump in US retail sales last month, and wholesale inflation climbed at its fastest pace since the index was revamped in December 2009. "Strong US economic data dampened the argument that the economy still needs massive stimulus and as rising inflation expectations start to weigh on valuations," said OANDA strategist Edward Moya.  "Technology stocks are leading the decline as pricing pressures will likely have the biggest impact on their bottom line. The skyrocketing move in yields is triggering some investors to take off some of their most profitable frothy trades.