Asian markets suffer further losses as central banks tighten screws

September 23, 2022
7:30 pm

AFP NewsNetwork

Asian markets suffer further losses as central banks tighten screws

Asian markets fell again on Friday as part of a global sell-off fueled by recession fears after central banks around the world hiked interest rates to fight decades of high inflation.

With price increases showing no solid signs of abating, policymakers have been forced to go on the offensive, warning that short-term setbacks are less painful for economies than the long-term effects of inaction.

The Federal Reserve’s decision on Wednesday to hike borrowing costs by 75 basis points for a third straight meeting followed a warning that more are on the way and they are unlikely to fall before 2024.

This was accompanied by similar moves from banks in several other countries including the UK, Sweden, Norway, Switzerland, the Philippines and Indonesia – all pointing to a bleak outlook for equities.

“We see this new higher rate path as significantly more likely to have a hard landing for longer and therefore not only clearly hawkish but clearly risky,” said Krishna Guha, vice chairman of Evercore ISI.

In a sign that recession expectations are rising, the yield on a 10-year US Treasury bond rose to 3.7 percent, its highest in a decade, while the S&P 500 slipped to its weakest since June and just above its 2022 lows .

The Nasdaq and Dow also suffered losses, while London, Paris and Frankfurt each lost more than one percent.

Asia largely followed suit, although bargain buying provided some support.

Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei and Manila all fell.

The dollar, which has soared to multi-decade highs against its major peers and emerging market currencies, maintained its strength.

Traders are watching developments following the Japanese Treasury Ministry’s intervention to support the yen after it hit a fresh 24-year low of 146 against the dollar.

The first such intervention since 1998, it helped push the yen to just above 140.

But analysts warned that the move would not have major long-term implications and the Bank of Japan’s refusal to tighten monetary policy – citing the need to stimulate the economy – left the yen vulnerable while the Fed hikes rates.

“Given the now even more stark contrast between the (central bank) policy stance and central banks everywhere else in the world … (the) MoF has to be long term and big in this intervention game if it is to have that much hope that yen weakness in a continued strong dollar environment,” said National Australia Bank’s Ray Attrill.

Oil markets remain subdued by concerns about a demand slump caused by the expected recession.

Both main contracts faltered amid speculation that OPEC and other big producers may be cutting output amid fears prices are falling too quickly.

The commodity is down about a third from highs recorded shortly after Russia’s invasion of Ukraine in February, and is even below pre-conflict levels.

“It’s going to be a very, very volatile last quarter,” said Energy Aspects’ Amrita Sen at Bloomberg Television. She added that there are “just too many different and conflicting factors driving prices right now.”