Asian markets follow Wall St down as traders eye Fed meeting

Asian markets fall again on inflation fear as oil prices extend gains

By

Hong Kong: Asian markets fell on Wednesday, as investors continued to weaken, inflation concerns and the central bank’s expectations of tightening monetary policy became the focus of attention.

After the news that the release of inventories in the United States and other countries would be lower than expected, oil prices rose further the next day, which dampened the hope of curbing the price surge, which has always been the key to the surge in inflation.

Washington President Joe Biden said that joint statements with China, India, Japan, South Korea and the United Kingdom have been flagged in advance, and analysts say this is part of the reason for the decline in the crude oil market in recent weeks.

Brent surged more than three percent and WTI more than two percent Tuesday and the buying carried on in Asian trade, with concern now building that OPEC and other major producers will rethink their plan to slowly reopen the taps.

“The release, widely expected, is the proverbial drop in a bucket… and might just lead OPEC+ producers to scale back a bit on what they were planning to pump,” said National Australia Bank’s Ray Attrill.

The rise in oil prices added to concerns that inflation — already at multi-year highs — will continue to rise, putting further pressure on banks to scale back the easy money policies put in place at the start of the pandemic and crucial to an 18-month market rally.

The Bank of New Zealand raised interest rates for the second consecutive month on Wednesday.

But everyone’s eyes are on the Fed, and some observers say that the Fed may scale back its bond purchase plan faster than it initially announced and raise interest rates next year.

“For quite a while now that extra liquidity hasn’t been going into the economy, it has been going more into the markets,” Matt Maley, of Miller Tabak + Co, told Bloomberg Television.

“The Fed is going to start pulling back on that.”

The minutes of the Fed’s November policy meeting will be carefully studied when they are released later in the day to understand what officials are thinking. Economic growth and unemployment benefits applications will also be announced, while paying close attention to the consumer confidence index.

Investors are also paying close attention to developments in Europe. Several European countries have adopted strict containment measures to combat the resurgence of the new crown virus. Austria has resumed partial blockade. Some people worry that Germany, the largest economy on the continent, will follow suit.

On currency markets the Turkish lira remained wedged close to all-time lows against the dollar after Recep Tayyip Erdogan dug in on his decision to pressure the central bank last Thursday to cut interest rates, despite soaring inflation.

The president is notorious for his unorthodox belief that high interest rates will cause inflation rather than help curb it.

You may also like