BEIJING (AP) – Asian stocks followed Wall Street lower yesterday after notes from a United States (US) Federal Reserve (Fed) meeting dented hopes interest rate hikes are finished.
Hong Kong, Tokyo and Seoul declined. Shanghai was unchanged. Oil prices were lower.
Wall Street’s benchmark S&P 500 lost 0.8 per cent on Wednesday after minutes from the Fed’s latest meeting suggested board members are unsure what to do after raising their key lending rate to a two-decade high. Traders had hoped they would decide inflation was under control and last month’s rate hike was the last.
“Fed officials face a tough balancing act between the risk of an inadvertent over-tightening of policy against the cost of an insufficient one,” said Tan Boon Heng of Mizuho Bank in a report.
The Shanghai Composite Index held steady at 3,150.29 while the Nikkei 225 in Tokyo retreated 0.4 per cent to 31,652.76 after being down more than one per cent.
The Hang Seng in Hong Kong was off 0.1 per cent at 18,308.06, recovering from a loss of more than two per cent in early trading.
The Kospi in Seoul shed 0.3 per cent to 2,517.92 and Sydney’s S&P-ASX 200 declined 0.5 per cent to 7,161.70.
India’s Sensex opened down 0.3 per cent at 65,324.26. Bangkok gained while New Zealand and other Southeast Asian markets retreated.
On Wall Street, the S&P 500 fell to 4,404.33, adding to the prior day’s 1.2 per cent tumble.
The Dow Jones Industrial Average lost 0.5 per cent, to 34,765.74. The Nasdaq composite dropped 1.1 per cent to 13,474.63.
The bond market is drawing money out of stocks as rising interest rates increased the yield, or the difference between the price and the payout at maturity. Yields widened further following the release of Fed notes increased expectations of another possible rate hike.
When safer bonds are paying higher returns, investors often feel less incentive to buy stocks, whose prices are more volatile.
At a news conference, Fed Chair Jerome Powell said on Wednesday the Fed staff no longer projects a recession by year-end but sees an economic slowdown with risks to growth tilted to the downside and risks to inflation tilted to the upside. Investor hopes have been supported by unexpectedly strong US hiring and consumer spending.
Critics have warned Wall Street too early embraced the hope inflation was under control and rate hikes to cool economic activity were ended.
Wall Street has retrenched this month on such concerns and expectations interest rates might stay high for longer than expected.