Asian stocks tumble after Fed says US rates will rise ‘soon’ – WHIO TV 7 and WHIO Radio

BEIJING — (AP) — Asian stock markets fell by unusually wide margins on Thursday after the Federal Reserve indicated it plans to start raising interest rates soon to calm inflation.

Market benchmarks in Tokyo and Hong Kong fell more than 2%. Seoul and Sydney fell nearly 3%.

Wall Street’s benchmark S&P 500 lost 0.1% on Wednesday after a Fed statement said the U.S. central bank “expects it to be appropriate soon” to raise rates. Investors expect four rate hikes this year, starting in March. The Fed also said monthly bond purchases that lower long-term rates by pumping money into the financial system would be phased out in March.

“Chances for more aggressive rate hikes should no longer be discounted,” Philip Wee and Eugene Leow of DBS Group said in a report. If inflation doesn’t come down before the Fed’s March meeting, “there may be more catching up to do.”

The Nikkei 225 in Tokyo fell 2.5% to 216,339.53 and the Hang Seng in Hong Kong fell 2.2% to 23,753.94. The Shanghai Composite Index fell 0.9% to 3,423.60.

Seoul’s Kospi fell 2.9% to 2,630.65 and Sydney’s S&P 500 lost 2.6% to 6,782.50.

New Zealand and Singapore fell while Jakarta and Bangkok advanced.

On Wall Street, the S&P 500 slipped to 4,349.93 after rising 2.2% ahead of the Fed’s announcement.

The Dow Jones Industrial Average fell 0.4% to 34,168.09. The Nasdaq composite was little changed at 13,542.12, shedding a 3.4% gain earlier in the day.

Wall Street rose immediately after the Fed statement, but major indexes gave up gains as Chairman Jerome Powell asked questions about how and when the central bank will start letting its balance sheet shrink after buying trillions of bond dollars during the pandemic. This would put upward pressure on market interest rates.

The selloff accelerated as Powell acknowledged that the high inflation that has weighed on businesses and consumers is not getting better. This could force the Fed to become even more aggressive in raising rates and removing the support it has put in place for the markets.

The last time the Fed raised rates and reduced its balance sheet at the same time was in late 2018. The S&P 500 lost almost 20%.

“Since the December meeting, I would say the inflation picture is about the same but probably slightly worse,” Powell said. “It hasn’t improved. It probably got a little worse, and that’s the trend.

Powell also said it was possible to raise interest rates without hurting the labor market, and would not rule out the possibility that the Fed could raise short-term rates at one of its seven meetings. remaining this year or opt for a bigger-than-usual increase to one of them.

The Fed’s near-zero interest rates have helped lift stock prices for nearly two years, but markets have been volatile since Powell and other officials said in mid-December that plans to Reduced economic stimulus could be accelerated to combat soaring inflation.

In energy markets, benchmark U.S. crude fell 43 cents to $86.92 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.75 to $87.35 on Wednesday. Brent crude, the price base for international oils, fell 47 cents to $88.27 a barrel in London. It advanced $1.76 the previous session to $89.96.

The dollar rose slightly to 114.57 yen from 114.55 yen on Wednesday. The euro fell to $1.1228 from $1.1254.

Garland K. Long