Asian markets fall after Fed says more rate hikes are likely

BEIJING – Asian stock markets rallied on Thursday after the Federal Reserve added to recession fears, saying it was not ready to raise US interest rates to cool inflation.

The Hang Seng HSI,
-2.76%
In Hong Kong shed 3% while the Shanghai Composite Index slipped 0.6%.

Sydney’s S&P/ASX 200 XJO,
-1.84%
fell 1.8% and the Kospi 180721,
+0.09%
In Seoul declined 0.6%. Benchmark indices in Malaysia FBMKLCI,
-1.25%
and Indonesia Jakidx,
+0.25%
Rose, but stocks fell in Taiwan Y9999,
-0.87%
and Singapore STI,
-1.30%.
Japanese markets are closed for a holiday.

Wall Street’s benchmark S&P 500 index plunged 2.5% after the Fed raised its short-term lending rate by 0.75 percentage points, three times its usual margin, for a fourth time this year.

Fed Chair Jerome Powell bolstered expectations of more rate hikes, saying “we have a way to go.” He said it would be “very early” to consider pausing.

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“Recession risks are rising, but that’s the price the Fed is willing to pay to get inflation under control,” said James Knightley, Padhraic Garvey and Chris Turner of ING in a report.

The Fed and central banks in Europe and Asia have aggressively raised rates this year to stop inflation, which is running at several decades high. Investors worry that could lead the global economy into recession.

Consumer prices in the United States rose 6.2% over a year earlier in September, the same as the previous month. But core inflation, which excludes volatile food and energy prices to give a clearer picture of the trend, accelerated to 5.1% from August’s 4.9%.

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The Fed said Wednesday it could shift to a more deliberate pace of rate hikes and would consider the overall economic impact.

On Wall Street, the S&P 500 SPX,
-2.50%
fell to 3,759.69. The Dow Jones Industrial Average DJIA,
-1.55%
Lost 1.5% to 32,147.76. The Nasdaq Composite Comp,
-3.36%
3.4% to 10,524.80 Euro.

Tech stocks, retailers and health care companies were among the biggest decliners.

The yield on the two-year Treasury, an indicator of market expectations of Fed action, rose to 4.58% from 4.55% before the Fed statement. The yield on the 10-year Treasury, used to set mortgage rates, climbed to 4.10% from 3.98%.

Investors hope that the weakening of housing sales and other activities may encourage Fed officials to ease the plans for the promotion. But recent data, especially on hiring, has been relatively strong, a sign that the Fed may remain aggressive.

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Data from payroll processor ADP showed companies added jobs at a faster pace in October than expected.

The government is due to release unemployment data on Thursday and a report on the broader jobs market on Friday.

In energy markets, benchmark US it. crude CLZ22,
-0.47%
Lost 43 cents to $89.57 in electronic trade on the New York Mercantile Exchange. The contract rose from $1.63 to $90 on Wednesday. Brent Crude BRNF23,
-0.31%,
The price basis for international oil trading shed 27 cents to $95.89 per barrel in London. It rose $1.51 the previous session to $96.16 per barrel.

The dollar USDJPY,
-0.41%
Gained to 147.33 yen from Wednesday’s 146.94 yen.

Source

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