HONG KONG — Asian stocks fell on Friday following a rout on Wall Street fueled by concerns over rising interest rates and soaring inflation, while the pound extended losses the next day after battered by fears of a recession in the UK.
Global markets have been hit this year by a series of crises, including soaring inflation, rising interest rates, China’s economic slowdown and war in Ukraine.
There was some relief after the Federal Reserve hiked borrowing costs by 50 basis points on Wednesday – the most since 2000 – but suggested a feared 75-point hike was not in order of the day for now.
However, US traders ran for the hills on Thursday as they eyed a period of fierce monetary tightening from the US central bank as it struggles to contain inflation at its highest level in more than 40 years. .
The Nasdaq – dominated by technology companies particularly sensitive to higher rates – lost 5%, while the Dow Jones and the S&P 500 fell more than 3%.
“Valuations get even more sensitive, very sensitive, when rates go up and that’s what we’re going through,” Invesco’s Kristina Hooper told Bloomberg Television.
“It’s only getting worse as we get into the thick of monetary policy tightening in the United States.”
That selloff spread to Asia, where Hong Kong fell more than 3% as tech companies took a hit. Meanwhile, the city’s European Chamber of Commerce has called the financial hub’s strict pandemic travel restrictions and bans on frequent flights a “nightmare” for businesses.
The remarks come a week after the Australian Chamber of Commerce recommended Hong Kong follow the example of Singapore or Japan in lowering quarantine requirements for business travellers.
Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei and Manila also fell. However, Tokyo ended the morning up slightly.
Continued weakness in China’s economy caused by strict shutdowns and other containment measures has added to selling pressure as officials scramble to rein in a Covid surge by sticking to a zero Covid policy .
On Thursday, various neighborhoods in Beijing asked residents to work from home, while Shanghai, the country’s largest city, remains essentially closed.
In the foreign exchange markets, the pound continued to struggle a day after plunging more than 2% in reaction to updated forecasts from the Bank of England which predicted that annual inflation would exceed 10% and the economy would recover. would contract later this year.
Crude rose after major oil producers, led by Saudi Arabia and Russia, refused to increase production beyond their expected marginal increase as they weighed tight supply issues caused by the war in Ukraine.
“OPEC’s inability to increase production when the market desperately needs it is worsening an already dangerous supply shortfall,” said Stephen Innes of SPI Asset Management.
“This means geopolitical tensions will remain elevated, and while there are currently risks on the demand side, it seems likely that the threat of a supply disruption will be the dominant driver at this time,” he said. -he declares.