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
“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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