Asian markets retreated on Friday after a sell-off on Wall Street in response to a forecast-busting jump in US inflation that fanned expectations the Federal Reserve will embark on a more aggressive campaign of monetary tightening.
The 7.5% jump in prices last month was the fastest in 40 years and reinforced fears that the central bank is falling behind the curve in keeping it under control, which has fed a sense of uncertainty across trading floors.
US stocks immediately sank on the news but managed to claw their way back as the day progressed before being hit by Fed official James Bullard, who said he wanted to see interest rates lifted one percentage point by the start of July.
The St Louis Fed boss said he was in favour of a 50 basis point lift next month – double the usual rise and the first since 2000 – and two more after that.
Meanwhile, US Treasuries – a guide to future borrowing costs – have risen above 2% and analysts are predicting up to seven rate hikes this year.
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Markets have for months been hit by speculation about the Fed’s plans for monetary policy, having made an about-turn at the end of the year on its view that inflation would be temporary and subside as the global economy reopened.
All three main indexes in New York ended sharply lower with tech firms – which are susceptible to higher rates – among the worst hit. The Nasdaq dived more than 2%.
Asia, which has enjoyed a broadly upbeat week, was also largely down.
Hong Kong, Shanghai, Sydney, Singapore, Seoul, Wellington, Taipei, Manila and Jakarta all fell into the red, while Mumbai was down more than 2%. Tokyo was closed for a holiday.
The Hang Seng Index dipped 0.07%, or 17.69 points, to 24,906.66. The Shanghai Composite Index fell 0.66%, or 22.96 points, to 3,462.95, while the Shenzhen Composite Index on China’s second exchange dropped 1.72%, or 39.51 points, to 2,262.96.
London opened lower even as data showed the British economy rebounded a healthy 7.5% in 2021. Paris and Frankfurt also sagged.
The dollar rallied above 116 yen while it was also well up against the pound and euro as well as most other higher yielding currencies including the Australian dollar and South Korean won.
Key figures around 0820 GMT
Hong Kong > Hang Seng Index: DOWN 0.1% at 24,906.66 (close)
Shanghai > Composite: DOWN 0.7% at 3,462.95 (close)
London > FTSE 100: DOWN 0.7% at 7,617.19
Tokyo > Nikkei 225: Closed for a holiday
New York > Dow: DOWN 1.5% at 35,241.59 (Thursday close)
- AFP with additional editing by Sean O’Meara
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