Asian markets swing as traders weigh Fed tightening, inflation

Asian markets track Wall St drop on Fed rate hike plans


Hong Kong: Asian markets fell on Thursday, after the New York stock market suffered a miserable sell-off, betting that the Federal Reserve will raise interest rates several times to cope with rising inflation.

The much-anticipated minutes of the December policy meeting of the U.S. Central Bank showed that although officials are concerned about the rapidly spreading variant of the Omicron coronavirus, they believe that the world’s top economies are in poor health and can absorb high borrowing costs.

Due to persistently high price increases, the Federal Open Market Committee has begun to cancel the large-scale bond purchase stimulus plan implemented at the beginning of the pandemic, which will end in March.

Traders generally expect the bank to start raising interest rates by then.

Policymakers have said that they will not withdraw support until the unemployment rate is under control and inflation continues to rise. Both seem to be realized or close to being realized.

Now that officials are ready to take action, the minutes of the Fed’s meeting stated: “It may be necessary to raise the federal funds rate faster or faster than participants had previously anticipated.”

In recent months, global central banks have ceased to provide large-scale support, especially the support of the Federal Reserve, which has made the market uneasy-cheap cash has set a series of record or multi-year highs.

With the highlight being taken away, traders are retreating, especially those who invest in technology companies, which are more susceptible to higher borrowing costs.

On Wall Street, the Nasdaq Index plummeted by more than 3%, while the Dow Jones and S&P 500 indexes, which both opened new highs this week, fell by more than 1%.

Asia tracked sales.

Tokyo led the decline, falling by more than 2%, while Sydney fell by more than 1%. Hong Kong, Shanghai, Seoul, Wellington, Taipei, Manila and Jakarta also fell sharply.

“We are prepping people for volatility,” Carol Schleif, of BMO Family Office, told Bloomberg Television.

“You had another record double-digit year and yet investors’ mood is pretty dour. We definitely think the readjustment of the volatility will increase this year because there is a lot to be dealt with.

“You do have a levelling off of some things, improvement in some things and people are going to be watching both the Fed and company earnings.”

The prospect of higher rates also weighed on other assets.

Oil shed more than one percent, with concerns about virus lockdowns in China weighing on demand optimism.

Bitcoin dropped to $42,506 at one point, its lowest level since a flash crash at the start of December, and well down from the record near $69,000 seen in November.

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