World News | Asia Stocks Follow Wall St Down as Fed Warns of Higher Rates
Get latest articles and stories on World at LatestLY. Asian shares skidded on Thursday after a retreat on Wall Street as markets registered their dismay over the Federal Reserve's warning that still higher interest rates are in store following its latest increase.
Bangkok, Dec 15 (AP) Asian shares skidded on Thursday after a retreat on Wall Street as markets registered their dismay over the Federal Reserve's warning that still higher interest rates are in store following its latest increase.
Oil prices fell while US futures edged higher.
Also Read | Flesh-Eating Bacteria Kills Danish Man Four Years After Pet Cat Bit His Finger.
Japan reported its trade deficit in November surged to over 2 trillion yen (USD 15 billion) as higher costs for oil and a weak yen combined to push imports higher. It was the 16th straight month of red ink and a record high for the month of November.
Tokyo's Nikkei 225 lost 0.3 to 28,058.42 and the Hang Seng in Hong Kong sank 1.1 per cent to 19,449.15. The Kospi in Seoul gave up 1.1 per cent to 2,372.78.
The Shanghai Composite index fell 0.3 per cent to 3,167.73 and Australia's S and P/ASX 200 shed 0.6per cent to 7,208.80.
Shares fell in Taiwan and Bangkok but rose in Mumbai.
As expected, the central bank raised its key short-term rate by 0.50 percentage points on Wednesday. It was its seventh hike this year.
The Fed also said it expects rates to be higher over the coming few years than it had anticipated.
Recent signs that inflation has eased had stoked optimism that the Fed might signal the possibility of rate cuts in the second half of next year.
But during a press conference, Fed Chair Jerome Powell emphasized that the full effects of the central bank's efforts to slow the economy to bring down inflation have yet to be fully felt.
“The Fed did not welcome the disinflation trends that have just started to emerge and focused on robust job gains and elevated inflation. Any hopes of a soft landing disappeared as the Fed seems like they are committed to taking rates much higher," Edward Moya of Oanda said in a commentary.
The S and P 500 lost 0.6 per cent to 3,995.32, giving up an earlier gain of 0.9 per cent. The Dow Jones Industrial Average fell 0.4 per cent to 33,966.35, and the Nasdaq composite gave back 0.8per cent, closing at 11,170.89.
Roughly 70 per cent of the stocks in the S and P 500 closed lower on Wednesday, with technology companies, banks and retailers among the biggest weights on the benchmark index. Apple fell 1.6 per cent, Goldman Sachs dropped 2.3 per cent and Best Buy slid 3.9 per cent.
Small company stocks also fell. The Russell 2000 index slid 0.7 per cent to 1,820.45.
The Fed's latest hike is smaller than the previous four 0.75 percentage point increases and comes a day after an encouraging report showed that inflation in the US slowed in November for a fifth straight month, to 7.1 per cent.
Powell said the Fed plans to hold rates at a level high enough to slow the economy “for some time” to ensure inflation really is crushed.
He said the Fed's projections released on Wednesday do not include any for rate cuts in 2023.
“The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases, but it will take substantially more evidence to give confidence that inflation is on a sustained downward path,” Powell said.
“I wouldn't see the committee cutting rates until we're confident that inflation is moving down in a sustained way,” Powell said.
The latest increase brings the Fed's federal funds rate to a range of 4.25 per cent to 4.5 per cent, its highest level in 15 years.
Fed policymakers forecast that the central bank's rate will reach a range of 5per cent to 5.25 per cent by the end of 2023.
That suggests the Fed is prepared to raise rates by an additional 0.75 percentage points next year.
The Fed also signalled it expects its rate will come down by the end of 2024 to 4.1per cent, and drop to 3.1 per cent at the end of 2025.
Consumer spending and employment remain strong. That has made it more difficult for the Fed to tame inflation while also helping to protect the slowing economy from a possible recession.
The US will release its weekly report on unemployment benefits on Thursday, along with retail sales data for November.
In other trading Thursday, US benchmark crude gave up 73 cents to USD 76.55 per barrel in electronic trading on the New York Mercantile Exchange. It gained USD 1.89 to USD 77.28 a barrel on Wednesday.
Brent crude shed 64 cents to USD 82.06 per barrel.
The US dollar rose to 135.62 Japanese yen from 135.46 yen. The euro fell to USD 1.0652 from USD 1.0682. (AP)
(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)