Asia markets sink after Fed hikes interest rates

The US Fed raised its target rate by a quarter point in its latest policy move and said it expects two more rate hikes for next year.

Trading screen
Source: Bloomberg

Markets in Asia reacted negatively to the interest rates hike from the United States (US) Federal Reserve (Fed) on Wednesday following Wall Street’s losses, as investors had been hoping for a less aggressive fiscal approach amid the global growth slowdown.

The US Fed raised its target rate by a quarter point in its latest policy move and said it expects two more rate hikes for next year, down from three rate hikes previously.

Tokyo stocks were bleeding minutes before it ended its Thursday’s session, with the benchmark Nikkei 225 index down 3.30% or 693.55 points to 20,296.45. The broader Topix index also plunged 2.73% or 42.47 points to 1,513.68.

Singapore shares took a beating, with Singapore’s Straits Times Index down 12.22 points or 0.40% to 3,046.43 points by midday.

Chinese stocks fell at 2.00pm, Hong Kong time, with the Shanghai Composite Index down 0.50% or 12.81 points lower to 2,536.76, while the Hang Seng Index was down 1.05% or 271.83 points to 25,580.56. China’s smaller Shenzhen Composite Index fell 0.37%.

Wall Street investors unsettled by Fed’s latest policy move

Wall Street investors reacted negatively to the interest rates hike and Fed’s less dovish forward-looking statement. The Nasdaq composite fell 2.2% to its lowest price since October 26 of 2017 while the S&P 500 slid 1.5%. The Dow Jones Industrial Average fell by 1.5%.

Although the hikes were lesser than the earlier estimate of three hikes, markets across the board grew jittery on the potential effects the future hikes could mean.

Experts had expected “dovish” interest rates increase and less excessive tightening of future interest rates as global growth conditions are weakening amid protectionism conflicts amongst countries and trade wars.

In the Fed’s policy statement, it pointed out the strong US jobs market and consumer spending and said it sees risks as “roughly balanced,” adding that it would continue to monitor global economic activity.

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