Asia shares slumped on Thursday after investors’ hopes that the US Fed might be about to ease up on its aggressive interest rate hikes policy were crushed.
The US central bank warned that its tight monetary approach would continue for some time yet as it bids to bring inflation under control, putting to rest any thought of a near-term pause.
That killed any optimism on trading floors across the region, where investors had been betting on a slowdown in the Fed’s attack on searing prices.
Also on AF: Hong Kong Banks on China Links to Restore Global Status
Asia’s markets were left reeling, tracking overnight Wall Street losses, after US interest rates rose by three-quarters of a percentage point again and investors warned there would probably be more to come.
Hong Kong and China stocks fell after a two-day rally as the gloomy news from the US and rising Covid-19 cases in the country fanned concerns about a further slowdown in global economic growth.
The Hang Seng Index dropped 3.1%, or 487.68 points, to 15,339.49, wiping out Wednesday’s gains. The Hong Kong China Enterprises Index lost 3.5%.
The Shanghai Composite Index dipped 0.2%, or 5.56 points, to 2,997.81, while the Shenzhen Composite Index on China’s second exchange dropped 0.04%, or 0.82 points, to 1,967.38.
The markets were also weighed down by a private-sector business survey showing China’s services activity contracted again in October amid fresh Covid-19 outbreaks.
In the latest fallout, electric vehicle maker NIO said it suspended production in the eastern city of Hefei amid rising Covid-19 cases and Yum China, operator of the KFC and Pizza Hut chains, said it was temporarily closing or reducing services at over 1,000 of its restaurants in China.
Elsewhere across the region, stocks fell, tracking losses on Wall Street overnight. The Philippines equity markets led the losses, falling 1.4% and stocks shed 2% in Singapore, 1.8% in Malaysia and 0.2% in Thailand. Japan’s markets were closed for a holiday.
Indian stocks dropped with Mumbai’s signature Nifty 50 index down 0.2%, or 35.00 points, to close at 18,047.85.
US Services, Payrolls Reports
Globally, shares slipped after the US Federal Reserve revealed its outlook shift on tightening from short and sharp to long and high.
Fed chairman Jerome Powell said it was “very premature” to think about pausing and that the peak for rates would likely be higher than previously expected.
Futures were now split on whether the Fed would move by 50 or 75 basis points in December, and nudged up the top for rates to 5.0-5.25% likely by May. They also imply little chance of a rate cut until December 2023.
All this was not what the equity markets wanted to hear and Wall Street fell sharply after Powell’s comments. Early Thursday, S&P 500 futures had edged up 0.2%, while Nasdaq futures added 0.3%.
EUROSTOXX 50 futures followed the overnight move and fell 0.7%, while FTSE futures lost 0.5%.
Attention now moves to the US ISM survey of services later on Thursday and Friday’s payrolls report where any upside surprise will likely reinforce the Fed’s hawkish outlook.
Also taking centre stage will be the Bank of England. The market is fully priced for a rate hike of 75 basis points to its highest since late 2008 at 3.0%.
Key figures
Tokyo – Nikkei 225 <> CLOSED
Hong Kong – Hang Seng Index < DOWN 3.1% at 15,339.49 (close)
Shanghai – Composite < DOWN 0.2% at 2,997.81 (close)
London – FTSE 100 < DOWN 0.33% at 7,120.81 (0940 GMT)
New York – Dow < DOWN 1.55% at 32,147.76 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
Read more:
China Stocks Slump on US Rate Hike, Rising Covid Cases
Chinese Yuan Close to 15-Year Low After Fed Rate Hike
