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APAC stocks drop as hawkish Fed sparks risk asset sell-off

By Mensholong Lepcha

05:40, 6 January 2022

Stock market prices indicating a fall
Fed’s hawkish comments sparked a global sell-off in risk assets – Photo: Shutterstock

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.

DE40

18,418.00 Price
-0.660% 1D Chg, %
Long position overnight fee -0.0214%
Short position overnight fee -0.0008%
Overnight fee time 21:00 (UTC)
Spread 2.0

J225

39,057.90 Price
-0.970% 1D Chg, %
Long position overnight fee -0.0112%
Short position overnight fee -0.0110%
Overnight fee time 21:00 (UTC)
Spread 10.0

US500

5,518.30 Price
-0.710% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.5

US30

40,195.50 Price
-0.330% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 2.0

“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.

Read more: Into the Metaverse: A look at FB, SNAP and others

Markets in this article

AU200
Australia 200
7956.3 USD
-26.2 -0.330%
AU200
Australia 200
7956.3 USD
-26.2 -0.330%
AU200
Australia 200
7956.3 USD
-26.2 -0.330%
AU200
Australia 200
7956.3 USD
-26.2 -0.330%
AU200
Australia 200
7956.3 USD
-26.2 -0.330%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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