HONG KONG: Asian markets dropped at the open on Friday, tracking Wall Street losses as investors continue to exhibit concern over persistently high global inflation and the likelihood of further interest rate hikes.
Major markets in Tokyo, Shanghai, Hong Kong and Sydney opened lower, in line with overall market sentiment ahead of a decision from the United States Federal Reserve next week.
Asian stocks look set to extend their weekly declines into a fifth straight week, following on from continuing weakness in US and European equities.
Wall Street’s three main indices rallied briefly on Thursday, but the gains fizzled, with traders taking little comfort from US President Joe Biden’s announcement of a tentative deal to avert a potentially damaging railroad strike.
The broad-based S&P 500 fell 1.1 percent Thursday and London rose less than a tenth of a percent, but both Frankfurt and Paris fell.
The Nasdaq was particularly weighed down by Adobe, which dropped a precipitous 16.9 percent after agreeing to acquire Figma, an Internet-based collaborative design platform, for $20 billion in cash and stock.
All eyes remain on the Fed, which has already instituted two consecutive 75-basis-point hikes and is widely expected to carry out a third.
On Thursday, US retail sales data showed a surprising increase in August, but the report also downgraded sales in the month prior, tempering the good news.
Weekly US jobless claims retreated once again, and industrial production fell modestly in August.
Asian markets rally in early trading, building on US gains
The new data was not enough, however, to offset the widespread bearish sentiment following higher-than-expected US inflation data released earlier in the week, which showed yearly inflation slowing by less than forecast and monthly inflation rising.
Fed expectations
Analysts expect the Fed to continue raising interest rates, in a bid to cool an overheating economy and combat sky-high inflation, which remains near decades-highs in major economies.
“Because of the dramatic rise in Treasury yields, the Fed is going to have to keep raising rates beyond (next week),” said prominent investor Louis Navellier in his podcast on Thursday.
“I think they might now raise rates in November just before the (US) midterm elections and possibly December.”
Other commentators echoed that view, with OANDA’s senior market analyst Edward Moya addressing the concern that further hikes could send the world’s largest economy into a recession.
“The latest round of data suggest the Fed can stick to aggressive rate hikes as the labour market remains strong and as the economy slowly softens,” he said.
“The risks of the Fed sending the economy into a severe recession are growing but right now the data doesn’t support that argument.”
Now that the data is in, markets are fully focused on the Fed’s decision as their next potential pivot, said Fiona Cincotta, senior financial markets analyst at City Index.
“This is a market waiting for the next catalyst,” she told Bloomberg News.
“What we saw in the selloff on Tuesday is the repricing of expectations of the Fed. Until we really hear from the Fed we are not going to get a very clear direction.”
Key figures at around 0230 GMT
Tokyo - Nikkei 225: DOWN 1.1 percent at 27,567.75
Hong Kong - Hang Seng Index: DOWN 0.7 percent at 18,798.57
Shanghai - Composite: DOWN 0.9 percent at 3,169.73
New York - Dow: DOWN 0.6 percent to 30,961.82 points (close)
London - FTSE 100: DOWN less than 0.1 percent at 7,274.08 (close)
Euro/dollar: DOWN at $0.9995 from $0.9997
Pound/dollar: DOWN $1.1461 at from $1.1472
Euro/pound: UP 87.22 pence from 87.14 pence
Dollar/yen: DOWN at 143.29 yen from 143.45 yen
Brent North Sea crude: UP 0.3 percent at $91.13 per barrel
West Texas Intermediate: UP 0.3 percent to $85.33 per barrel
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