By Andrew Galbraith
SHANGHAI (Reuters) – Asian stocks fell on Thursday, prolonging a global slump after Federal Reserve meeting minutes showed U.S. interest rates rising faster than expected amid concerns over persistence of inflation.
Concerns about rising U.S. rates combined with growing concerns about the rapid spread of the Omicron coronavirus variant to weigh on riskier assets.
Asian stocks took inspiration from overnight losses on Wall Street. The Nasdaq plunged more than 3% on Wednesday in its largest single-day percentage decline since February and the S&P 500 fell the most since November 26, when news of the Omicron variant hit global markets for the first time.
MSCI’s largest Asia-Pacific stock index outside of Japan fell 0.95%, Australian stocks slipped 1.53%, and the Japanese Nikkei stock index fell 2.08% .
Chinese blue chips fell 1.37% as private sector survey showed activity in China’s service sector grew faster in December, but COVID-19 outbreaks continued weighed on the outlook.
Elsewhere, a rotation of non-tech investors continued to hit top names, with the Sony Group slumping 6.8%.
“There is a risk that the Fed will fall into the trap of making policy mistakes because it may need to raise interest rates faster than expected, but given when it comes out of quantitative easing, this could coincide with a slowdown in economic conditions. cycle and also lower inflation on base effects, ”said Carlos Casanova, senior economist for Asia at Union Bancaire Privée in Hong Kong.
“Of course, if you anticipate a faster rate of Fed price cuts, it doesn’t translate well for Asian asset classes, so you’re probably going to see more capital outflows from the region, which is will translate into both weaker stocks and also depreciating pressures on the FX front.
Fed policymakers said at their December meeting that a “very tight” job market and uninterrupted inflation could force it to raise interest rates sooner than expected and start reducing its overall holdings as a second brake on the economy, according to the minutes of this meeting.
Fed officials were uniformly concerned about the pace of price increases that promised to persist, alongside global supply bottlenecks “through” 2022, according to the minutes.
More hawkish-than-expected views from U.S. central bank officials also pushed U.S. Treasury yields higher. On Thursday, the US 10-year rate remained high at 1.6929%, just after Wednesday’s close at 1.7030%.
US 2- and 5-year yields, more sensitive to rate hike expectations, hovered around their highest levels since Q1 2020.
The rise in US yields continued to support a firm dollar, although the currency lost ground against the yen after hitting five-year highs earlier this week, falling 0.13% to 115.95.
The euro was stable at $ 1.1311 and the dollar index was little changed at 96.161.
In commodities markets, global benchmark Brent crude fell 1.26% to $ 79.78 per barrel and U.S. crude fell 1.07% to $ 77.02 per barrel after producers of OPEC + have agreed to increase production.
Spot gold was flat at $ 1,808.90 an ounce as rising US bond yields tarnished the precious metal’s luster. [GOL/]
(Reporting by Andrew Galbraith; Editing by Ana Nicolaci da Costa)