Kevin Buckland

TOKYO (Reuters – Asian equities reacted sharply to Wall Street’s decline and bonds rose Friday, as investors became more cautious about risk taking in the face of growing concerns that inflation could persist after the global economic downturn.

While the broad market fell by 1.86%, it saw a drop of 1.95%.

Australian stock markets fell by 2.05% while South Korea’s Kospi dropped 1.51%.

A MSCI Index of Asia-Pacific Stocks fell by 1.07%.

For the Golden Week Holiday, Chinese markets will be closed one week starting Friday

Rob Carnell (Asia-Pacific head, research, ING Singapore) stated that although it can be debated whether the stagflation is real or not. “The whole growth-inflation backdrop appears to have just tilted towards a less favorable one.”

We don’t know if this will become embedded and cause problems over the years, but it is enough scary to believe that what’s happening in markets can be justified.

U.S. stock options showed a 0.51% drop for the following an overnight drop of 11.99% in the index.

The Nasdaq Futures indicated a 0.49 percent retreat in addition to the 0.43% loss on Thursday.

Tokyo trade saw the benchmark 10-year Treasury note rally, and the yield fell to 1.488% on Sept. 28, the lowest level since September 28th.

The against currency was at 6 major rivals. Thursday’s 1 year high of 94.504 was a distant memory. Last time it changed hands, 94.326.

Jerome Powell, Federal Reserve Chairman, said Wednesday that solving “tension” between high inflation and high unemployment was the Fed’s top priority. He acknowledged a conflict between the U.S. central banking’s goals of stability prices and full employment and stated that this is a possibility.

China, which has suffered from regulatory restrictions in property and tech sectors and is now facing a power crisis that may push up global energy prices, has proven to be a major concern for investors.

After Brent reached $80 per barrel for the first week in three years, crude oil prices eased on Friday.

Futures were mostly flat on Thursday with $78.32 and were slightly lower at $75.07.

Following Thursday’s record 1.77% increase, Gold, an inflation hedge or safe haven, fell 0.1% to $1755.35 an Ounce. This was the highest since March.