Thursday, 27 January, 2022

Asian markets track Wall St drop

Asian markets track Wall St drop

HONG KONG: Tech firms led losses across Asian markets Thursday following a painful sell-off in New York fuelled by bets that the Federal Reserve will embark on an aggressive campaign against soaring inflation by hiking interest rates several times.

The much-anticipated release of minutes from the US central bank’s December policy meeting showed that while officials were concerned about the fast-spreading Omicron coronavirus variant, they were confident the world’s top economy was in rude health and able to absorb high borrowing costs, reports AFP.

The Federal Open Market Committee has already started winding back the vast bond-buying stimulus put in place at the start of the pandemic as price rises remain stubbornly high, with the programme due to end in March.

Traders had widely expected the bank to then start lifting rates.

Policymakers had said they would not remove their support until the Fed was happy it had unemployment tamed and inflation was running persistently hot. Both appear to have been achieved or close to it.

Now officials are ready to act, with the Fed minutes saying: “It may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated.”

The move away from massive central bank support around the world, particularly from the Fed, has rattled markets in recent months—having notched up a series of records or multi-year highs on the cheap cash.

With the punch bowl being taken away, traders are in retreat, particularly those invested in tech firms, which are more susceptible to higher interest rates owing to their reliance on borrowing to fuel growth.

On Wall Street, the Nasdaq plunged more than three percent, while the Dow and S&P 500, which both started the week with new records, lost more than one percent.

And Asia tracked the selling. Tokyo led losses, falling almost three percent, while Sydney was off almost as much. Seoul, Wellington, Bangkok and Mumbai gave up more than one percent each.

Hong Kong, Shanghai, Taipei, Manila and Jakarta were also down.