SHANGHAI- Asian shares fell on Thursday, extending a global slump after Federal Reserve meeting minutes pointed to a faster-than-expected rise in US interest rates due to concerns about persistent inflation.
Worries over higher US rates combined with growing concerns about the rapid spread of the Omicron coronavirus variant to weigh on riskier assets.
Asian shares took their cue from overnight losses on Wall Street. The Nasdaq plunged more than 3 percent on Wednesday in its biggest one-day percentage drop since February and the S&P 500 fell the most since Nov. 26, when news of the Omicron variant first hit global markets.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.95 percent, Australian shares slid 1.53 percent and Japan’s Nikkei stock index fell 2.08 percent.
Chinese blue-chips fell 1.37 percent as a private sector survey showed China’s service sector activity expanded more quickly in December, but continuing COVID-19 outbreaks weighed on the outlook.
Elsewhere, an investor rotation out of technology continued to hit high-profile names, with Sony Group slumping 6.8 percent.
“There is a risk that the Fed might fall into the trap of making policy errors because they do have to perhaps hike interest rates faster than expected, but given the timing of their exit from quantitative easing, it could coincide with a slowdown in the economic cycle and also a decline in inflation on base effects,” said Carlos Casanova, senior economist for Asia at Union BancairePrivee in Hong Kong.
“Of course if you’re pricing in a faster price pace of Fed tapering, that doesn’t translate well for Asian asset classes so you are likely going to see more outflows from the region, which will translate both into weaker equities and also depreciatory pressures on the FX front.” – Reuters
