Asian markets sink after Wall Street’s weekly loss on rate-hike fears

Asian markets sink after Wall Street's weekly loss on rate-hike fears

BEIJING — Asian stock markets sank Monday after Wall Street ended with a loss for the week amid anxiety about Federal Reserve plans for more interest rate hikes to cool inflation.

The Hang Seng HSI,
-2.09%
in Hong Kong dropped 2% after the territory’s leader, John Lee, tested positive for the coronavirus after returning from an Asia-Pacific meeting in Bangkok.

The Shanghai Composite Index SHCOMP,
-0.81%
lost 0.8% and the Nikkei 225 NIK,
+0.02%
in Tokyo was flat.

The Kospi 180721,
-1.16%
in South Korea fell 1.1% and Sydney’s S&P/ASX 200 XJO,
-0.19%
lost 0.2%. Benchmarks in Singapore STI,
-0.79%,
Taiwan Y9999,
-0.31%
and Indonesia JAKIDX,
-0.34%
declined.

All the major US stock indexes ended with a weekly loss after a Fed official, James Bullard, rattled investors by suggesting the US central bank’s base lending rate might have to be raised to as much as almost double its already elevated level.

“Bullard dimmed the light on rallies,” said Tan Boon Heng of Mizuho Bank in a report.

On Friday, Wall Street’s benchmark S&P 500 index SPX,
+0.48%
pink 0.5% to 3,965.34. The Dow Jones Industrial Average DJIA,
+0.59%
added 0.6% to 33,745.69. The Nasdaq composite COMP,
+0.01%
lost less than 0.1% to 11,146.06.

All the major US indexes ended with a loss for the week after Bullard, president of the St. Louis Federal Reserve Bank, gave a presentation that indicated the Fed’s benchmark rate might have to rise to between 5% and 7%. That would be up from its current level of 3.75% to 4% following four hikes of 0.75 percentage points, three times the Fed’s usual margin.

Investors worry repeated rate hikes by the Fed and central banks in Asia and Europe this year to cool surging inflation might tip the global economy into recession.

Traders hope signs economic activity is slowing and inflation pressures easing might prompt the Fed to ease off its plans. Fed officials including chair Jerome Powell have warned rates might need to stay high for an extended period to extinguish inflation.

Traders expect the Fed to raise its key rate again at its December meeting but by a smaller margin of 0.5 percentage points.

In energy markets, benchmark US crude CLZ22,
-1.09%
lost 74 cents to $79.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.56 to $80.08 on Friday. Brent crude BRNF23,
-0.98%,
the price basis for international oil trading, sank 90 cents to $86.72 per barrel in London. It slumped $2.16 to $87.62 the previous session.

The dollar USDJPY,
+0.03%
rose to 140.42 yen from Friday’s 140.36 yen.

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