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Asia Shares Retreat After Fed Dashes Rate Easing Hopes

US Federal Reserve chiefs reasserted their commitment to capping inflation sending stock indexes across the region downwards again

Asian markets were a sea of red on Friday
An investor looks at an electronic board showing stock information at a brokerage house in Beijing. Photo: Reuters.


Asian stocks suffered on Friday as hopes that the US might ease back on its rate hikes charge were dashed, deepening the gloom across the region’s trading floors.

That came after Federal Reserve officials continued to talk up additional rate increases ahead of a crucial US jobs report later in the day, while rising crude oil prices added to concerns about prolonged inflation.

Shares slid for a third day with Japan’s Nikkei and Hong Kong’s Hang Seng both in retreat with tech stocks driving the fall-back as investors fretted over recession risks. MSCI’s broadest index of Asia-Pacific shares declined 0.85%.


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The benchmark Nikkei 225 index dropped 0.71%, or 195.19 points to end at 27,116.11, pulling back from a two-week high reached on Thursday. The broader Topix index fell 0.82%, or 15.67 points, to 1,906.80.

The Hang Seng Index dropped 1.51%, or 272.10 points, to 17,740.05 with its tech stocks tumbling. Mainland markets remained closed for the final day of the Golden Week holiday.

South Korea’s Kospi slipped 0.33%, weighed partly by a decline in Samsung Electronics shares, after the technology giant flagged a worse-than-expected 32% drop in quarterly operating earnings. Australia’s stock benchmark retreated 0.59%.

Indian stocks edged back with Mumbai’s signature Nifty 50 index down 0.19%, or 33.75 points, at 17,298.05.

The downbeat mood across the region’s trading floors came after Fed officials showed no intention of backing down from the most aggressive rate hike campaign in decades.

Fed Governor Lisa Cook, Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari all emphasised that the inflation fight was ongoing and they were not prepared to change course.


Key US Jobs Figures

Stocks had started the week on a strong footing, with the MSCI world equity index rallying 5.65% in the first two days amid speculation that the pace of central bank tightening might slow, but that has fizzled out since Wednesday.

Markets are now currently pricing in an 85.5% chance of a 75 basis point increase from next month’s Federal Open Market Committee meeting, and 14.5% odds for a half-point bump.

Investors will now be looking to Friday’s non-farm payrolls report for some clarity as to whether a steady diet of rate hikes has begun to take a bite out of hiring and wage inflation.

“Ongoing hawkish comments by Fed officials [are] a clear pushback on the ‘Fed will pivot’ narrative that has supported risk assets since the beginning of the week,” said Tapas Strickland, head of market economics at National Australia Bank.

The yield on the benchmark 10-year Treasury note was at 3.8297% in Tokyo trading, little changed from its New York close following a two-day rebound from a two-week low of 3.5620%.


Dollar Index Flat

The dollar index, which tracks the greenback versus a basket of six major peers, was little changed at 112.24 following a 1.84% two-day rally from a two-week low.

Japan’s yen weakened past 145 again overnight and fluctuated around that level in early Friday trading. Japanese authorities intervened to support their currency for the first time since 1998 on September 22 following a break of the 145 level.

Crude oil on Friday continued the climb triggered by OPEC+ output cuts announced this week.

Brent crude futures rose 19 cents to $94.61 a barrel. WTI crude futures rose 24 cents to $88.69 a barrel, after earlier hitting $89.37 per barrel, the highest since September 14.


Key figures

Tokyo – Nikkei 225 < DOWN 0.71% at 27,116.11 (close)

Hong Kong – Hang Seng Index < DOWN 1.51% at 17,740.05 (close)

Shanghai – Composite <> CLOSED

London – FTSE 100 < DOWN 0.06% at 6,993.33 (0950 BST)

New York – Dow < DOWN 1.15% at 29,926.94 (Thursday close)


  • Reuters with additional editing by Sean O’Meara


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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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