Asian markets plunge with Wall St on Fed hawkish outlook – Digital Journal


Hong Kong was one of the biggest losers in Asia as markets reversed course after the Federal Reserve signaled interest rates would rise more than expected – Copyright AFP Brendan Smialowski

Asian stocks fell on Thursday after the Federal Reserve signaled that US interest rates would rise more than expected and warned that the world’s largest economy would grow less than expected next year, stoking fears that a a recession looms.

Traders took the lead on Wall Street, where a tougher-than-expected statement dampened hopes that the central bank could soften its approach to fighting inflation.

Markets had rallied after data on Tuesday showed the consumer price index rose less than expected in November, marking a fifth straight slowdown and the lowest level since December last year.

But the Fed seemed less inclined to accept that the recent numbers were enough to indicate that enough progress was being made.

While he raised rates by the expected 50 basis points, down from the previous four 75-point hikes, his “dot plot” of forecasts suggested he saw them peak next year at 5.1 percent, plus higher than what the markets had predicted.

“Fifty basis points is still a historically large increase, and we still have a ways to go,” Fed chief Jerome Powell told reporters after the announcement.

He added that he “would not see us considering” any cuts until officials were happy that inflation was on track to its two percent target.

“Much more evidence will be needed to give confidence that inflation is on a sustained downward path,” he said.

The Fed also cut its growth expectations next year as it faced headwinds from tighter monetary policies, prompting fresh warnings of a recession, which have weighed on stocks for much of the year.

But Powell said: “I don’t think anybody knows if we’re going to have a recession or not, and if we do, whether it’s going to be deep or not.”

– ‘Worried about a recession’ –

After the Wall Street pullback, Asia fell into the red, with Hong Kong, Shanghai, Tokyo, Sydney, Seoul, Taipei, Manila and Jakarta all down.

“The Fed did not welcome the disinflation trends that have just begun to emerge and has focused on strong job creation and high inflation,” said Edward Moya of OANDA.

“Any hope of a soft landing is gone as the Fed appears committed to raising rates much higher.”

Despite the Fed’s tougher remarks, Tomo Kinoshita of Invesco Asset Management said: “US stocks have experienced limited declines, indicating that financial markets do not wholeheartedly buy into such a hawkish attitude, perhaps because some formulators Fed policy makers have already talked about the possibility of rate cuts. .”

But he added: “Long-term bond yields appeared to have peaked, which is a sign that investors are now worried about a recession.”

The likelihood of rates rising further exceeded hopes for China’s revival after nearly three years of strict zero-COVID containment measures that have crippled its economy.

While the reopening is expected to provide a much-needed boost to growth, there are immediate concerns about the impact of rising infection numbers on the healthcare system and the ability of businesses to function.

And in a sign of the effect of the anti-Covid strategy, data on Thursday showed that retail sales fell more than expected in November, industrial production growth slowed and investment weakened.

And analysts warned that there probably won’t be any improvement this month.

– Key figures around 0300 GMT –

Tokyo – Nikkei 225: DOWN 0.3 percent to 28,081.55 (break)

Hong Kong – Hang Seng Index: DOWN 1.9 percent to 19,309.24

Shanghai Composite: DOWN 0.3 percent to 3,166.04

Euro/Dollar: LOW to $1.0655 from $1.0684 on Wednesday

Dollar/yen: UP to 135.57 yen from 135.45 yen

Pound/Dollar: DOWN to $1.2392 from $1.2424

Euro/Pound: UP to 85.98 pence from 85.96 pence

West Texas Intermediate: DOWN 0.8 percent at $76.66 a barrel

Brent North Sea crude: DOWN 0.7 percent at $82.17 a barrel

New York – Dow: DOWN 0.4 percent to 33,966.35 (close)

London – FTSE 100: DOWN 0.1 percent to 7,495.93 (close)


Please enter your comment!
Please enter your name here