BEIJING- Asian share markets got off to a cautious start on Wednesday, after another volatile Wall Street session, as investors braced for the outcome of the Fed’s meeting late in the day and any hints about faster tightening of monetary policy.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.26 percent early on Wednesday, but the index has skidded 2.4 percent this year, and is testing mid-December’s one-year low.
Concerns that the Fed’s expected interest rate hikes could hammer Asia’s equities markets have dragged on the regional benchmark, though moves elsewhere have been even more dramatic.
Globally, US stocks posted their worst week since 2020 last week, and MSCI’s world index is on course for its biggest monthly drop since the COVID-19 pandemic hit markets in March 2020.
Japan’s Nikkei lost 0.8 percent to hover around its lowest level since Dec. 2020.
The Fed is due to update its policy plan later on Wednesday, likely fleshing out timing for expected rate hikes and shrinking its massive balance sheet.
“Asian markets are currently being affected by volatility in global markets, concerns about Fed tightening in the face of higher inflation and uncertainty about events in Russia and Ukraine,” said Mansoor Mohi-uddin, chief economist at Bank of Singapore.
Growing tensions as Russian troops massed on Ukraine’s border have added to a risk-averse environment for investors.
“We expect the Fed meeting, however, will not add to volatility. The central bank is set to only finish its quantitative easing in March and while it will signal interest rates are likely to be raised in March too, the Fed will endorse market expectations for quarterly 25bps hikes for its fed funds rate rather than more aggressive tightening this year,” Mohi-uddin added. – Reuters
