SYDNEY (BLOOMBERG) – Asia stocks fell at the open on Wednesday (Sept 29) after US stocks saw their worst day since May and bond yields spiked on mounting concerns about inflation and the debt-ceiling impasse in Washington.

Japan’s benchmark Nikkei index opened down 2 per cent while Australia’s S&P/ASX 200 Index fell 1.1 per cent and South Korea’s Kospi index tumbled 1.3 per cent.

Hang Seng Index futures fell 0.8 per cent.

S&P 500 futures rose 0.4 per cent as of 9.08am in Tokyo after the S&P 500 plunged 2 per cent overnight – the most since May. Technology shares fared worse than economically sensitive stocks as Treasury yields climbed on inflation fears.

During a Senate hearing on Tuesday, US Federal Reserve chair Jerome Powell and Treasury Secretary Janet Yellen both warned that a US default due to a failure to raise the debt ceiling would have catastrophic consequences. Republicans blocked a Democratic move in the Senate to raise the debt limit.

Heated remarks from Senator Elizabeth Warren also weighed on markets. After slamming Mr Powell on his track record over financial regulation,Ms Warren said he’s a “dangerous man to head up the Fed” and that’s why she’ll oppose his renomination.

The debate in Washington is the latest headwind for investors reeling from surging energy costs at the same time central banks are laying down plans to withdraw some of the pandemic stimulus. US consumer confidence dropped in September for a third straight month, suggesting concerns over the Delta variant and higher prices continue to dampen sentiment.

“What we got here is stock market that finally looks vulnerable as Treasury yields surge, oil prices look like they could easily hit US$90 a barrel, and as supply chain issues show no signs of easing,” said Edward Moya, senior market analyst at OANDA. “There is a lot of drama happening on Wall Street and most of it has to do with a reset of inflation expectations.”

Meanwhile, China Evergrande Group is facing another bond interest payment after giving no sign that it had paid a separate one last week, as its deepening debt crisis looms over global markets and highlights funding risks for other developers. In the US, Federal Reserve officials have questioned several big banks about their exposure to Evergrande.

Elsewhere, the pound traded around the lowest since January as expectations of higher rates were offset by surging energy prices and panic-buying in the UK that are keeping investors cautious. Bitcoin was trading below US$42,000.