Asian shares fall on Fed officials' hawkish policy stance

14/1/2022 6:35:00 AM

Global Markets: Asian shares fall on Fed officials' hawkish policy stance - Reuters

Global Markets: Asian shares fall on Fed officials' hawkish policy stance - Reuters

TOKYO (Jan 14): Asian shares took a beating on Friday after a fresh salvo of hawkish remarks from Federal Reserve officials solidified expectations that US interest rates could rise as soon as March, leaving markets braced for tighter monetary conditions.Fed Governor Lael Brainard became the latest and most senior US central banker on Thursday to signal that rates will rise in March to combat inflation.Equity markets turned deeply red with investors seeking shelter in safer assets such as government

Equity markets turned deeply red with investors seeking shelter in safer assets such as government debt.China's blue-chip index was down 0.3% and Hong Kong's Hang Seng index was off 0.6%.Fed Governor Christopher Waller, who has repeatedly called for a more aggressive response to high inflation, later on Thursday said a rapid-fire series of four or five US rate hikes could be warranted if inflation doesn't recede.

In the bond market, yields on 10-year US Treasury notes were at 1.725%, slowly creeping up to Monday's near two-year highs, signalling investors' preference for the safety of government debt over volatile technology and growth stocks."This is a problem because every asset has arguably been inflated by loose monetary policy," he added.

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A TOKYO (Jan 14): Asian shares took a beating on Friday after a fresh salvo of hawkish remarks from Federal Reserve officials solidified expectations that US interest rates could rise as soon as March, leaving markets braced for tighter monetary conditions.Telegram channel for the latest updates.A BENGALURU (Jan 12): Most of emerging Asia's stocks and currencies rose on Wednesday after the Federal Reserve Chair Jerome Powell sounded less hawkish than expected overnight, with the South Korean won jumping for a third day on growing rate hike bets..

Fed Governor Lael Brainard became the latest and most senior US central banker on Thursday to signal that rates will rise in March to combat inflation. Equity markets turned deeply red with investors seeking shelter in safer assets such as government debt. While the US consumer price index rose 7 per cent in the 12 months through December, the biggest annual increase in nearly 40 years, investors were reassured by the fact that the jump was not a surprise, as the Fed looks set to raise rates as soon as March. MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.3%, while stock markets in South Korea, Indonesia and the Philippines climbed between 0.8% in mid-morning trade, while Australia lost 1. “If you are a global investor and you've seen very significant stock market gains in the US during 2021, if you are seeing inflation as a threat then a lot of investors may be tempted to reallocate funds away from developed equity markets in the West into the mix of developed and developing markets in East Asia,” he said.2% and Japan's Nikkei shed 1.

9% by the midday break.1 per cent higher, after recording its biggest daily gain in a month yesterday. The US dollar tumbled after Powell did not provide any new details on interest rates at a congressional hearing on his confirmation for a second term as the Fed's chair, adding that he believed the economy could handle tighter monetary policy. South Korean shares dropped 1.5% after its central bank raised its benchmark rate 25 basis points to 1.87 per cent after surging nearly 2 per cent a day earlier.25% on Friday, taking it back to where it was before the pandemic as it seeks to restrain consumer price rises. That boosted beaten down tech stocks the most on Wall Street, and South Korea's tech heavy bourse KOSPI tracked those gains to rise 1. China's blue-chip index was down 0.42 per cent while Chinese blue-chips slipped 0.

3% and Hong Kong's Hang Seng index was off 0.6%. The uneven performance in Asia followed small gains on Wall Street overnight, with the S&P 500 rising 0.4%, taking this week's gains to almost 1% ahead of the Bank of Korea policy review on Friday where a 25 basis point hike to the benchmark interest rate was extremely likely. "Everyone is really nervous right now. It's because everything is potentially going to come under pressure from aggressive Fed policy," said Kyle Rodda, a market analyst at IG in Melbourne.23 per cent. "There's the hope that it'll be a slow and painless handoff to normal policy," he added. Though producer prices remain elevated, the cooling trend should provide room to the country's central bank to loosen monetary policy.

"But that's not necessarily assured with the Fed taking inflation so seriously.11 per cent." Fed Governor Christopher Waller, who has repeatedly called for a more aggressive response to high inflation, later on Thursday said a rapid-fire series of four or five US rate hikes could be warranted if inflation doesn't recede. US inflation as measured by the consumer price index surged 7. The comments underscore the divergence in economic and policy outlooks between the world's two largest economies.3% on the possibility of more stimulus as the world's second-largest economy grapples with property woes, Covid-19 outbreaks and a manufacturing slowdown.0% in December, posting its biggest year-on-year increase in nearly four decades, data on Wednesday showed. Shift to safety In the bond market, yields on 10-year US Treasury notes were at 1. Some analysts say that there could still be room for a more aggressive rate hike schedule.

725%, slowly creeping up to Monday's near two-year highs, signalling investors' preference for the safety of government debt over volatile technology and growth stocks. The peso is already under pressure from the nation's widening trade deficit, which was mostly due to a very high fuel import bill. Japan's 10-year government bond yield hit as high as 0.25 per cent by year-end, and 2.156%, its highest since March 2021. Markets were facing a more persistent risk of growing demand for safe-havens, especially around key events involving US central bank policy and US data, IG's Rodda said. Today, the US 10-year yield edged up to 1.422% Singapore shares rise 0. "This is a problem because every asset has arguably been inflated by loose monetary policy," he added.

"Every asset will have to correct to reflect higher or tighter monetary policy.725 per cent." The Fed's hawkish shift has tended to benefit the US dollar, though it did not catch much of a bid on Friday, losing ground against the Japanese yen, which traditionally has drawn demand from flights to safety.9% Subscribe to Mid-day email alert We deliver news to your inbox daily. The dollar index was flat at 94.9229 per cent from yesterday's close of 0.767, settling above a two-month low of 94.660 hit on Thursday and trading in a tighter range after three days of sharper falls. Today's drop in Treasury yields hit the dollar, which fell below key support levels today.

The euro bounced to US$1.1464, hovering near its two-month high of US$1.05 per cent at 94.1481. The Japanese yen found a bid amid the risk-off mood, trading at 113.60.85, near its strongest level against the greenback in 3½ weeks.

In commodity markets, gold was a shade firmer at US$1,823 an ounce but still below its January peak at US$1,831.1443. Oil prices edged lower as investors took profits after two days of gains amid fears of aggressive US interest rate hikes, though the losses were partly offset by hopes of strong demand in a tightly supplied market over the longer term. Brent fell 27 cents to US$84. Global benchmark Brent crude fell 0.20 a barrel, while US crude lost 43 cents to US$81.69.61 per barrel and US West Texas Intermediate crude edged down to US$82.

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