Asian stocks fall after Fed minutes point to faster rate hikes By Reuters

© Reuters. FILE PHOTO: Passers-by with protective face masks are seen in front of an electronic board showing Japan’s Nikkei share, in the middle of the pandemic with coronavirus disease (COVID-19), in Tokyo, Japan November 1, 2021. REUTERS / Issei Kato

By Andrew Galbraith

SHANGHAI (Reuters) – Asian stock markets fell on Thursday and European stocks were ready for a lower opening after the Federal Reserve̵[ads1]7;s meeting minutes pointed to a faster-than-expected rise in US interest rates due to concerns about persistent inflation.

US stocks sold overnight after investors interpreted minutes from the Fed’s December meeting as more hawkish than expected.

Fed politicians said a “very tight” labor market and unabated inflation could demand that it raise interest rates faster than expected and begin to reduce its overall assets as a second slowdown in the economy, the minutes showed.

“Of course, if you price in a faster pace of Fed downsizing, it does not translate well for Asian asset classes, so you will probably see more outflows from the region, which will lead to both weaker stocks and also depreciating pressure on the currency front,” Carlos said. Casanova, senior economist for Asia at Union Bancaire Privee in Hong Kong.

Concerns about higher US prices combined with growing concern about the rapid spread of the Omicron coronavirus variant to weigh on riskier assets.

MSCI’s broadest index for Asia-Pacific equities outside Japan fell nearly 1.5% in afternoon trading before some losses. Australian equities fell 2.74% in their biggest daily percentage fall since the beginning of September 2020, and the stock index fell 2.88%, the biggest daily fall since June.

Chinese blue-chip fell 1% as persistent COVID-19 outbreaks weighed on prospects despite a private sector survey showing that China’s service sector activity increased faster in December.

European equities were also set to open sharply lower, with the pan region down 2.07% in early trading. German fell 1.7% and futures fell 1.43%.

The report showed that Fed officials were consistently concerned about the pace of price increases that promised to persist, along with global supply bottlenecks “well into” 2022.

The Nasdaq plunged more than 3% on Wednesday in its biggest one-day drop since February and fell the most since November 26, when news of the Omicron variant first hit global markets.

“There is a risk that the Fed may fall into the trap of making political mistakes because they may have to raise interest rates faster than expected, but given the timing of their exit from quantitative easing, it may coincide with a decline in the economic cycle and also a decline in inflation on base effects, “said Casanova.

The minutes also pushed US government interest rates higher above the curve. The US 10-year interest rate reached its highest level since April 2021 on Thursday above 1.73% and was last at 1.7299%, from a close of 1.7030% on Wednesday.

The policy-sensitive US 2-year interest rate reached a new 22-month high of 0.8380%, while the 5-year interest rate remained close to the peaks last seen in February 2020.

Higher US interest rates continued to support a solid dollar, although the currency returned slightly against the yen after hitting five-year highs earlier this week, falling 0.21% to 115.86.

The euro weakened 0.05% to $ 1.1307 while the exchange rate climbed by the same margin to 96.228.

In commodity markets, the global benchmark index fell 0.91% to $ 79.14 per barrel and fell 0.89% to $ 80.08 per barrel after OPEC + producers agreed to increase production and an increase in US inventories.

was down 0.38% to $ 1,802.91 per ounce, with higher US bond yields dampening the luster of the precious metal. [GOL/]

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