Asian shares tumble after restrictive Fed minutes

© Reuters. FILE PHOTO: Passers-by wearing face masks are seen in front of an electronic board showing the Japanese Nikkei stock average amid the coronavirus disease (COVID-19) pandemic in Tokyo, Japan on Nov. 1, 2021. REUTERS / Issei Kato

By Andrew Galbraith

SHANGHAI (Reuters) – Asian stocks fell Thursday, prolonging a global slump after minutes of the Federal Reserve's meeting indicated a faster-than-expected rise in US interest rates amid concerns over persistent inflation.

Concerns over higher US interest rates combined with growing concerns over the rapid spread of the Omicron variant of coronavirus to weigh on riskier assets.

Asian stocks followed their overnight losses on Wall Street. The Nasdaq plunged more than 3% on Wednesday, its largest one-day percentage decline since February and its largest decline since November 26, when news of the Omicron variant first hit global markets.

MSCI's broadest index for Asia Pacific stocks outside of Japan was down 0.95%, Australian stocks were down 1.53% and the stock index was down 2.08%.

Chinese blue chips fell 1.37% as a private sector survey showed China's services sector expanded faster in December, but ongoing COVID-19 outbreaks weighed on the outlook.

Elsewhere, a rotation of technology investors continued to hit high profile names, too Sony (NYSE 🙂 Group collapses 6.8%.

“There is a risk that the Fed will fall into the trap of monetary policy errors by having to hike rates faster than expected, but given the timing of its exit from quantitative easing, that could coincide with a slowdown in the economic cycle and also a decline inflation due to base effects, "said Carlos Casanova, senior economist for Asia at Union Bancaire Privee in Hong Kong.

"Of course, if you price in a faster rate of Fed tapering, that doesn't translate well to Asian asset classes, so you'll likely see more outflows from the region, resulting in both weaker stocks and devaluation." Print on the FX front. "

Fed leaders said at their December meeting that a "very tight" labor market and unabated inflation could raise interest rates earlier than expected and act as a second brake on the economy to begin reducing total asset holdings, according to the minutes of that meeting.

Fed officials were equally concerned about the pace of price hikes that should continue, alongside global supply shortages "well into" 2022, the minutes show.

Federal Reserve officials' more restrictive than expected views also pushed US Treasury bond yields higher. On Thursday, the 10-year US yield remained up 1.6929%, just below Wednesday's 1.7030% closing price.

US 2- and 5-year yields, which are more sensitive to rate hike expectations, hovered near their highest levels since Q1 2020.

Higher US yields continued to support a firm dollar, although the currency fell slightly against the yen after hitting a five-year high earlier this week, falling 0.13% to 115.95.

The euro remained stable at $ 1.1311 and remained little changed at 96.161.

In the commodities markets, the global benchmark fell 1.26% to $ 79.78 a barrel and 1.07% to $ 77.02 a barrel after OPEC + producers agreed to increase production.

was stable at $ 1,808.90 an ounce, with higher US bond yields tarnishing the precious metal's sheen. (GOL /)

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