HONG KONG – Markets fell in Asian trade Friday following another wave of losses in Wall Street as traders returned their focus to the Federal Reserve’s plans to ramp up interest rates, while oil prices sank from their seven-year highs.
Angst about the bank’s determination to fight surging inflation by removing its ultra-loose monetary policy is dealing a severe blow to the rally in global markets that has run virtually uninterrupted for nearly two years, leaving most markets in the red at the start of 2022.
Officials have already started tapering the massive bond-buying stimulus put in place at the start of the stimulus and it is widely expected they will then start lifting borrowing costs from March, though by how much is a matter of speculation.
The Fed has also said it will begin offloading the bonds it already has on its books, which have been key in helping keep rates low, though it is not clear how quickly it will do that.
Markets are now keenly awaiting the Fed’s board meeting next week, hoping it will provide a clear idea about its timetable for policy normalisation.
But with key officials now in a black-out period ahead of the gathering, there is little information for investors to work with, fuelling uncertainty and volatility.
Wall Street’s three main indexes closed deep in negative territory again — having spent much of the day well up — with tech firms again the big losers, owing to their susceptibility to higher rates.
Adding to the selling was data showing a pick-up in US jobless claims and a far-weaker-than-expected reading on a key manufacturing index, which all suggest that while the Omicron Covid variant is less severe than feared, it is still causing concern.
Traders are also keeping a nervous eye on Ukraine where Russia’s troop build-up is fanning concerns Moscow is planning an invasion.
And, having enjoyed a healthy run-up Thursday on the back of further easing measures by China, Asian equities followed suit.
Tokyo lost more than one percent, along with Sydney. Hong Kong retreated the day after a more than three percent hike, while Shanghai, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta were also off.
The sell-off in equities was matched by sharp drops in the oil market, with both contracts down more than two percent each after data showed US stockpiles at an eight week high with gasoline supplies beating forecasts.
The losses come after Brent and WTI hit peaks not seen since 2014 owing to optimism about the global recovery and demand outlook.
However, analysts still expect further gains, with Morgan Stanley joining Goldman Sachs in predicting $100 a barrel in the third quarter.
“We’ve been seeing some good gains this week, it’s not surprising we are seeing a bit of a pullback,” said Daniel Hynes at Australia & New Zealand Banking Group.
“The outlook is still pretty bright, however, nothing has fundamentally changed.”
Key figures around 0230 GMT
Tokyo – Nikkei 225: DOWN 1.4 percent at 27,377.44 (break)
Hong Kong – Hang Seng Index: DOWN 0.2 percent at 24,912.53
West Texas Intermediate: DOWN 2.3 percent at $83.55 per barrel
Brent North Sea crude: DOWN 2.1 percent at $86.51 per barrel
Shanghai – Composite: DOWN 0.4 percent at 3,539.78
Euro/dollar: DOWN at $1.1318 from $1.1343 late Wednesday
Pound/dollar: DOWN at $1.3595 from $1.3612
Euro/pound: DOWN at 83.25 pence from 83.33 pence
Dollar/yen: DOWN at 113.86 yen from 114.33 yen
New York – Dow: DOWN 0.9 percent at 34,715.39 (close)
London – FTSE 100: DOWN 0.1 percent at 7,585.01 (close)
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