Asian stock markets fell on Thursday after the Federal Reserve gave a more hawkish outlook than expected. Chinese stocks stopped a two-day rally because it wasn’t clear how the country would go about reducing COVID lockdowns, which made investors nervous.
The Shanghai Composite index was down 0.4%, and the Shanghai Shenzhen CSI 300 index was down 1%. This week, both indexes went up by about 3% on rumours that China might end its strict zero-COVID policy by the end of next year. But the Chinese government did not say anything about it.
The Hang Seng index in Hong Kong did the worst for the day. It fell by 3% because technology stocks were sold off because the Federal Reserve raised interest rates. To keep up with the Fed, Hong Kong’s Monetary Authority also raised interest rates on Thursday, which is bad news for local stocks.
A private survey also showed that China’s services sector shrank more than expected in October. This shows that COVID-related problems are still having an effect on the world’s second-largest economy. The low reading and the uncertainty about the zero-COVID policy made people feel bad about the Chinese markets.
Asian stocks in general also went down. The Nifty 50 index in India went down by 0.2%, and the Taiwan Weighted index went down by 0.9%. India is also paying attention to the start of an off-cycle meeting of the central bank on Thursday. At this meeting, the bank is expected to give more hints about the direction of monetary policy in the face of rising inflation.
The S&P/ASX 200 index in Australia fell 1.8%, while Malaysia’s benchmark index fell 1.3% and was the biggest loser in Southeast Asia.
As expected, the Fed raised rates by 75 basis points. Fed Chair Jerome Powell shot down rumours that interest rate hikes might stop for a while and warned that U.S. rates are likely to reach their highest point much sooner than first thought.
His comments caused a big sell-off in markets that are based on risk, and U.S. stocks fell during overnight trade.
But Powell also brought up the possibility of smaller rate hikes in the future. As a result, more and more traders are pricing in a 50 bps rate hike in December.
This year, rising interest rates were a big problem for Asian markets because they made it harder to get money and made low-risk debt look better. This trend is likely to continue in the near future, especially since high inflation in most parts of the world makes it even more important to raise interest rates.
Later in the day, the Bank of England will also raise interest rates.
