Asian markets tumbled at Friday’s open, trailing Wall Street’s losses as investors continue to express concerns about persistently high global inflation and the likelihood of more rate hikes.
The major markets in Tokyo, Shanghai, Hong Kong and Sydney opened lower in line with broader market sentiment ahead of a Federal Reserve decision next week.
Asian stocks are likely to extend their weekly declines for a fifth straight week after US and European stocks continued to be weak.
Wall Street’s three main indices rallied briefly on Thursday, but gains were wiped out as traders drew little comfort from US President Joe Biden’s announcement of a tentative deal to avert a potentially damaging railroad strike.
The broad-based S&P 500 fell 1.1 percent on Thursday and London rose less than a tenth of a percent, but both Frankfurt and Paris fell.
The Nasdaq was particularly hurt by Adobe, which fell a steep 16.9 percent after it agreed to acquire Figma, an internet-based collaborative design platform, for $20 billion in cash and stock.
All eyes remain on the Fed, which has already initiated two consecutive 75 basis point rate hikes and is widely expected to conduct a third.
On Thursday, US retail sales data showed a surprise rise in August, but the report also downgraded sales from the previous month, dampening the good news.
Weekly US jobless claims fell again and industrial production fell slightly in August.
However, the new data wasn’t enough to offset widespread bearish sentiment after US inflation data came out higher than expected earlier in the week, showing annual inflation slowing less than forecast and monthly inflation rising.
– Fed expectations –
Analysts expect the Fed to continue raising interest rates to cool an overheated economy and combat sky-high inflation, which is still near decade highs in major economies.
“Because of the dramatic rise in Treasury yields, the Fed will need to keep raising rates beyond (next week),” prominent investor Louis Navellier said on his podcast on Thursday.
“I think they could now raise rates in November just before the midterm elections (in the US) and possibly in December.”
Other commentators shared this view, with Edward Moya, senior market analyst at OANDA, addressing concerns that further rate hikes could plunge the world’s largest economy into recession.
“Recent data suggests the Fed can stick with aggressive rate hikes as the job market remains strong and the economy slowly slows down,” he said.
“The risk of the Fed sending the economy into a deep recession is growing, but at the moment the data doesn’t support that argument.”
Now that the data is in, markets are fully focused on the Fed’s decision as their next potential pivot, said Fiona Cincotta, senior financial markets analyst at City Index.
“This is a market waiting for the next catalyst,” she told Bloomberg News.
“What we saw in Tuesday’s sell-off is the Fed’s reassessment of expectations. Until we actually hear from the Fed, we won’t get very clear direction.”
– Key figures at 0230 GMT –
Tokyo – Nikkei 225: FALSE, up 1.1 percent to 27,567.75
Hong Kong – Hang Seng Index: down 0.7 percent at 18,798.57
Shanghai — Composite: down 0.9 percent at 3,169.73
New York – Dow: MINUS 0.6 percent to 30,961.82 points (close)
London – FTSE 100: DOWN less than 0.1 percent at 7,274.08 (close)
Euro/Dollar: DOWN at $0.9995 from $0.9997
Pound/dollar: DOWN by $1.1461 from $1.1472
Euro/Pound: UP 87.22p from 87.14p
Dollar/Yen: DOWN at 143.29 yen from 143.45 yen
North Sea Brent Crude: up 0.3 percent to $91.13 a barrel
West Texas Intermediate: up 0.3 percent to $85.33 a barrel
