Asian markets follow Wall Street crash on Fed rate hike plans

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(AFP archive photo)

HONG KONG – Asian markets fell on Thursday following a massive sell-off in New York City fueled by bets that the Federal Reserve will embark on an aggressive campaign to tackle soaring inflation by repeatedly raising interest rate.

The long-awaited release of the minutes of the U.S. central bank’s policy meeting in December showed that while officials were concerned about the rapidly spreading variant of the Omicron coronavirus, they were convinced the world’s largest economy was in poor health. and able to absorb high borrowing costs.

The Federal Open Market Committee has already started scaling back the massive bond-buying stimulus program put in place at the start of the pandemic, as price hikes remain stubbornly high, with the program scheduled to end in March.

Traders widely expected the bank to start raising rates then.

Policymakers had said they would not withdraw their support until they were satisfied with having brought unemployment under control and inflation was consistently high. Both seem to have been achieved, or almost.

Now officials are ready to act, with the Fed minutes saying, “It may become warranted to raise the federal funds rate sooner or at a faster rate than participants anticipated.”

The dropping of massive support from central banks around the world, particularly the Fed, has rocked markets in recent months – after recording a series of all-time highs or multi-year highs on cheap money.

With the withdrawal of the punch bowl, traders are retreating, especially those investing in tech companies, which are more sensitive to higher borrowing costs.

On Wall Street, the Nasdaq plunged more than 3%, while the Dow Jones and the S&P 500, which both started the week with new highs, lost more than one percent.

And Asia followed the sale.

Tokyo led the losses, falling more than two percent, while Sydney was down more than one percent. Hong Kong, Shanghai, Seoul, Wellington, Taipei, Manila and Jakarta are also in sharp decline.

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

“You have had another record double-digit year and yet the mood of investors is rather gloomy. We definitely believe the volatility readjustment will increase this year as there is a lot to deal with.

“You have stabilized some things, improved some things and people are going to be watching both Fed and corporate earnings.”

The prospect of higher rates also weighed on other assets.

Oil fell more than one percent as concerns over virus lockdowns in China weighed on optimism in demand.

Bitcoin fell to $ 42,506 at one point, its lowest level since a lightning crash in early December, and well down from the record high of nearly $ 69,000 in November.

Key figures around 02:30 GMT

Tokyo – Nikkei 225: DOWN 2.1% to 28,721.49 (pause)

Hong Kong – Hang Seng Index: DOWN 0.8% to 22,716.37

Shanghai – Composite: DOWN 0.9% to 3,562.57

Dollar / yen: DROP to 115.89 yen from 116.06 yen Wednesday night

Pound / dollar: DOWN to $ 1.3545 from $ 1.3557

Euro / dollar: DOWN to $ 1.1313 from $ 1.1317

Euro / pound: up to 83.52 pence against 83.41

West Texas Intermediate: DROP 1.0% to $ 77.07 per barrel

North Sea Brent: DROP 1.2% to $ 79.81 per barrel

New York – DOW: DOWN 1.1% to 36,407.11 (close)

London – FTSE 100: Up 0.2% to 7,516.87 (close)

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