Asian markets slip on nervousness over future Fed action
Asian markets slipped on Monday, with Japan’s Nikkei 225 index down 3.4%, after a Friday selloff on Wall Street gave the S&P 500 its worst weekly loss since February.
Investors are still recalibrating their moves after the Federal Reserve signaled last week that it may raise current ultra-low rates sooner than expected. This gave the Dow Jones Industrial Average its worst weekly loss since last October.
Part of the Fed’s mission is to keep prices under control. The fear is that flare-up inflation may prompt central banks to cut back the lavish support that took markets to new highs after falling at the start of the coronavirus pandemic last year.
Until its last policy meeting last week, the Fed said it viewed recent price hikes as transient and would let the economy recover. He now plans to hike interest rates twice in 2023.
“The shift to an earlier timeline for a rate hike, accompanied by an upward revision of core inflation expectations to 3%, seems to suggest that the Fed may still be concerned about inflationary pressures to some extent. measure compared to its previous position to let inflation run wild, âIG’s Yeap Jun Rong said in a comment.
South Korea reported that its exports had increased by nearly 30% in the first 20 days of June, the latest indication that the region’s recovery is continuing despite persistent outbreaks of infections in many places.
The Nikkei gave up 983 points to 27,980.87 and Seoul’s Kospi lost 1.3% to 3,227.92. Hong Kong’s Hang Seng Index also lost 1.3% to 28,427.13. The Australian S & P / ASX 200 was down 1.7% to 7,243.50 and the Shanghai Composite Index was down 0.3% to 3,514.61.
On Friday, the S&P 500 fell 1.3% to 4,166.45 in a large pullback, while the Dow Jones Industrial Average fell 1.6% to 33,290.08. The Nasdaq composite fell 0.9% to 14,030.38.
The Fed has also started talks about slowing its $ 120 billion in monthly bond purchases, which helps keep mortgages and other long-term borrowing cheap. But the Fed chairman said such a reduction was probably still a long way off.
Markets were spooked after St. Louis Federal Reserve Chairman James Bullard told CNBC on Friday that his personal prediction was that the first rate hike could come as early as next year.
It is recognition that a recovering economy with near record high prices for homes and stocks may not need very low rates for much longer. A recent surge in inflation could also increase the pressure. But any pullback in Fed support would be a big change for markets, which have been feasting on ultra-low rates for over a year.
The Dow Jones lost 3.5% last week. The Nasdaq composite, which has more high-growth tech stocks, fell a much more modest 0.3%.
Still, major U.S. stock indexes remain relatively close to their all-time highs as the economy continues to emerge from the recession caused by the pandemic. The S&P 500 is only about 2% below its all-time high on Monday, and the Dow Jones is within 5% of its all-time high last month.
A measure of stock market nervousness known as the VIX rose on Friday, but only returned to its level about a month ago.
The 10-year Treasury yield eased to 1.40% Monday from 1.43% Friday night.
In other exchanges, US benchmark crude oil rose 45 cents to $ 72.09 per barrel in electronic trading on the New York Mercantile Exchange. He gained 60 cents to $ 71.64 on Friday. Brent crude, the international standard, climbed 35 cents to $ 73.86 a barrel.
The US dollar was at 109.83 Japanese yen, down from 110.27 on Friday. The euro was unchanged at 1.1861.