Asian stocks slumped, with the regional benchmark on track to enter a technical correction, as mounting worries over inflation and a resurgence in Covid-19 cases soured investor sentiment. The MSCI Asia Pacific Index slumped as much as 1.5 per cent, taking losses from a Feb 17 peak to 10 per cent, and wiping out all its gains for the year. Asian equities tracked losses in American shares after data on Wednesday showed US consumer prices climbed in April by the most since 2009.

“We need to kind of price in a more normal interest-rate environment, more normal inflation environment,” said Ken Peng, head of Asia investment strategy at Citigroup Inc.’s private-banking arm. “The shake up could last a while longer. But I’m still not too worried because, growth will comeback to be the most important element once interest rates normalize.”

Tech stocks have been at the forefront of a selloff in global equities this week as an explosive rally in commodity prices threatens to push up inflation. Asia’s tech shares, which are contending with higher US bond yields and stretched valuations just like their global peers, have also been hurt by regulatory tightening in China. Further, a fresh surge in infections in several countries including India, Japan and parts of Southeast Asia is weighing on regional stocks.

Losses in Asian stocks deepened after European equities opened weaker on Thursday. Futures on the S&P 500 index also dropped, erasing an earlier gain. The Asian benchmark has sharply underperformed its peers in the US and Europe in 2021 after leading global equity gains last year. The S&P 500 Index and the Stoxx 600 Index are both up about 8 per cent so far this year. Technology and communication services were the worst-performing sectors on the Asian gauge Thursday.

Japanese shares declined for a third day on Thursday, while stocks in China snapped a two-day winning run. Markets in Singapore, India, Indonesia, Malaysia, and the Philippines were shut for a holiday. In Taiwan, the benchmark stock index extended losses after slumping the most since March last year on Wednesday partly due to concern over-tightening of virus-linked restrictions.