APAC stocks drop as hawkish Fed sparks risk asset sell-off
05:40, 6 January 2022
Stock markets in Australia and Japan posted heavy losses on Thursday after the US Federal Reserve (Fed) meeting minutes indicated a sooner-than-expected hike in interest rates on inflation concerns.
“They (participants) noted that current conditions included a stronger economic outlook, higher inflation, and a larger balance sheet and thus could warrant a potentially faster pace of policy rate normalization,” read the December minutes of the Federal Open Market Committee (FOMC).
Hawkish comments from the Fed sparked a global sell-off in risk assets that saw tech-heavy Nasdaq Composite index post its worst intraday drop since February 2021, while Bitcoin prices tumbled over 7% in early Asia trade on Thursday.
Australian stocks sees worst day since 2020
Australia’s benchmark S&P/ASX 200 index saw its worst day since September 2020, down 2.7% on broad-based losses. Japan’s Nikkei 225 index fell 2.5% to an over two-week low.
“The December FOMC meeting saw an important shift in the Fed thinking with an earlier end to QE (quantitative easing) (by mid-March) with the dot plot signaling three rate hikes in 2022 and three more in 2023,” said ING in a note.
“We suspect March is too early for a rate hike given the lack of visibility caused by Omicron, but May is clearly on the cards.”
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Tech stocks extend losses
Technology stocks extended Wednesday’s losses to lead the fall during the session on expectation of tighter liquidity conditions. Australia’s S&P/ASX All Technology index plunged 5.7% on Thursday with buy now, pay later firms Afterpay and Zip tumbling 10.8% and 5.9% respectively.
In Japan, Topix-17 Electronic Appliances & PRE Instrument index was the worst performing sectoral index, down 3.5%. Semiconductor production ancillary firms Tokyo Electron and Advantest fell over 3% each, while Sony Group tumbled 6.3% having hit a near 22-year high a day earlier.
Hong Kong’s Hang Seng TECH index was on track to close lower for a fourth straight session on Thursday. The sectoral index has fallen over 6% in the first trading week of 2022.
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