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Asian Share Slide Continues Over Gloomy Inflation Outlook

Stocks across the region were still retreating on Friday after the US Fed’s pessimistic rate hikes forecast rattled investors and unsettled currencies


Asia stock markets slid again on Friday.
Risk appetite was sluggish after the US Federal Reserve delivered its third 75 bps rate hike in a row on Wednesday and warned that there are more to come. Global stocks have sunk to their lowest in two years. Photo: Reuters.

 

Asian stocks notched up their fourth consecutive weekly drop as investor sentiment continued to be weighed down by inflation woes.

Bonds across the globe were looking at an eighth weekly loss, as traders reacted to the US Fed’s gloomy outlook on soaring prices and the prospect of even more hefty interest rate hikes to come.

Currency markets also endured a turbulent day after Japan’s intervention to prop up the yen.

 

Also on AF: Why Japan Has Fallen Out of Love With a Weak Yen

 

China stocks extended their losses, also weighed down by foreign fund outflow concerns, Covid-19 woes and increasing geopolitical tensions, while Hong Kong shares fell towards an 11-year low.

For the week, the CSI 300 has lost 2.5% while the Hang Seng Index has plunged 4.1% and was set to log its worst weekly performance in 10 weeks.

Semiconductor stocks tumbled 3.2% to lead the declines, while shares of new energy firms and automobile makers retreated more than 2% each.

The Shanghai Composite Index dipped 0.66%, or 20.54 points, to 3,088.37, while the Shenzhen Composite Index on China’s second exchange dropped 1.4%, or 28.16 points, to 1,963.69.

Tech giants listed in Hong Kong fell more than 2%, with heavyweights Tencent and Meituan shedding 2.3% and 2.2%, respectively, to become the biggest drags on the Hang Seng benchmark.

The main Hang Seng Index dropped 1.18%, or 214.68 points, to 17,933.27.

 

UK, Sweden Follow US Rate Hike

Elsewhere across the region, risk appetite was sluggish after the US Federal Reserve delivered its third 75 bps rate hike this year.

Equities in Singapore and Taiwan were down more than 1.1% each, while stocks in Seoul tumbled over 2%. 

Indian stocks slumped with Mumbai’s signature Nifty 50 index down 1.73%, or 304.45 points, at 17,325.35. Markets in Japan were closed for a holiday.

Globally, stocks hit two-year lows while bonds faced a two-monthly loss, as investors digested the prospect of a far more aggressive rise in US interest rates.

Interest rates rose sharply this week in the United States, the UK, Sweden, Switzerland, Norway and Indonesia, but it was Federal Reserve’s signal that it expects high US rates to last through 2023 that set off the latest sell-off.

MSCI’s world stocks index fell to its lowest since mid-2020, having lost about 12% in the month or so since Fed chair Jerome Powell made clear that bringing down inflation would hurt.

 

Yen Steadies Against Dollar

European stocks were a sea of red for a second day, under pressure from losses in everything from bank stocks to natural resources and technology shares.

The pan-regional STOXX 600 was down about 0.5% in early trade, while Frankfurt’s DAX lost 0.6%, ranking it as one of Europe’s worst-performing indices. London’s FTSE lost 0.1%, against a backdrop of the pound tumbling to another 37-year low.

“Pretty much anything besides inflation data and central bank policy decisions is just noise at the moment, with the market firmly, and almost solely, focused on how high rates will rise across developed markets, and how long they will remain at those peaks,” CaxtonFX chief strategist Michael Brown said.

The euro and yen fell to 20-year lows on Thursday, until Japanese authorities stepped in to the market for the first time since 1998 to buy yen and arrest its long slide.

The yen was last steady at 142.29 per dollar and on course for its best week in more than a month, but few believe this strength will last. Friday was a holiday in Japan so trading was thin.

 

Key figures

Tokyo – Nikkei 225 <> CLOSED

Hong Kong – Hang Seng Index < DOWN 1.18% at 17,933.27 (close)

Shanghai – Composite < DOWN 0.66% at 3,088.37 (close)

London – FTSE 100 < DOWN 0.74% at 7,106.50 (0940 BST)

New York – Dow < DOWN 0.35% at 30,076.68 (Thursday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

Japanese Yen Sees First Gain in Weeks After Intervention

Bank of Korea in $10bn Deal With Pension Fund to Boost Won

 

Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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