Asian stocks slumped on Thursday after the U.S. Federal signaled it plans to hike interest rates in March and end its bond purchases that month to counter escalating inflation.
The hawkish tone, reflecting the upside risks to inflation triggered a dollar rally and dented the appeal of equities. Escalating Russia-Ukraine political tensions also sapped investors’ appetite for riskier assets.
Chinese shares hit their lowest levels in nearly 16 months on worries the Federal Reserve would move aggressively to curb inflation.
The benchmark Shanghai Composite index fell 61.42 points, or 1.78 percent, to 3,394.25 while Hong Kong’s Hang Seng index ended down 482.90 points, or 1.99 percent, at 23,807.
Japanese stocks tumbled as the FOMC event resulted in a solid bout of risk aversion across global financial markets. The Nikkei average sank 841.03 points, or 3.11 percent, to close at 26,170.30, while the broader Topix index closed 2.61 percent lower at 1,842.44.
Market heavyweight SoftBank lost 9 percent and Uniqlo operator Fast Retailing declined 2.6 percent. Sony Group, which is facing a fresh challenge from cash-rich rivals in the war over the future of gaming, plunged 6.7 percent while Tokyo Electron, which produces tools to build semiconductors, gave up 4.8 percent.
Industrial robot maker Fanuc rose 1.1 percent after upgrading its full-year earnings forecast.
Australian markets fell into correction territory after the Fed signaled interest-rate hikes as early as March. The benchmark S&P/ASX 200 index fell 123.30 points, or 1.77 percent, to 6,838.30 – extending losses for a four straight session and marking its lowest since April last year.
The broader All Ordinaries index slumped 133.60 points, or 1.84 percent, to 7,114.50, with tech and gold stocks leading the losses. Xero, SEEK and Newcrest Mining lost 6-7 percent.
Energy stocks bucked the weak trend as oil prices broke past $90 a barrel at one point for the first time since 2014. Santos rallied 3.6 percent and Woodside Petroleum added 2.5 percent.
Seoul stocks ended lower for the fifth straight session to hit a 14-month low amid the Fed’s hawkish stance and a steep fall in LG Energy Solution on its market debut. The Kospi average plunged 94.75 points, or 3.50 percent, to 2,614.49 – marking the lowest closing in 14 months since 2,591.34 points on Nov. 30, 2020.
Tech stocks such as Samsung Electronics, SK Hynix and Naver all fell around 3 percent even as Samsung broke both its quarterly and annual records for revenue in the fourth quarter of 2021.
LG Energy Solution closed at 505,000 won, down 15.41 percent from its opening price of 597,000 won but still higher than the IPO price of 300,000 won.
Central bank data showed earlier in the day that sentiment among South Korean businesses over the economic situation worsened in January, due to higher logistics cost and weaker demand in the construction and electronic sectors.
New Zealand shares hit their lowest level in more than a year after the Fed sounded very hawkish and domestic data showed New Zealand’s annual inflation rate topped a three-decade high at the end of last year, keeping pressure on the Reserve bank to continue ratcheting-up interest rates.
New Zealand’s Reserve Bank will review interest rates on February 23 after raising the benchmark interest rate for the second time in two months in November.
The benchmark NZX-50 index dropped 135.33 points, or 1.11 percent, to 12,050.32, marking its lowest close since October 2020, dragged down by high-growth technology and property-related stocks.
Overnight, U.S. stocks erased early gains to end mostly lower and Treasury yields spiked after the Fed indicated that it plans to begin raising interest rates “soon,” citing elevated inflation and a strong labor market.
The tech-heavy Nasdaq Composite surged as much as 3.4 percent before ending marginally higher.
The Dow and the S&P 500 slipped 0.4 percent and 0.2 percent, respectively as Fed Chair Powell backed a March liftoff and said he won’t rule out a hike every meeting.
He described the current inflation situation as “slightly worse” than in December.
Business News
Asian Shares Tumble As Fed Backs March Liftoff
2022-01-27 08:42:00
