Asian stock markets are trading sharply lower on Thursday, following the mixed cues overnight from Wall Street, as traders are reacting to hawkish comments from the US Federal Reserve, which indicated that it plans to begin raising interest rates “soon,” citing elevated inflation and a strong labor market. Surging crude oil prices limited the downside. Asian markets closed mixed on Wednesday.
Traders also remain concerned about the raging spread of the coronavirus omicron variant across the globe and its impact on the pace of economic recovery from the pandemic.
Fed Chair Jerome Powell claimed during his post-meeting press conference that the central bank has “quite a bit of room” to raise interest rates before it would harm the economy. He said the Fed is likely to hike interest rates in March and signaled that it would then start reducing its asset holdings.
The Fed left interest rates unchanged at near-zero levels as widely expected but said “it will soon be appropriate to raise the target range for the federal funds rate.” In a separate statement, the Fed outlined plans to significantly reduce the size of its balance sheet, saying it expects to start the reductions after it begins raising interest rates.
The central bank said it would further reduce the pace of its bond purchases to $30 billion per month beginning in February, adding that it expects to end its asset purchase program by early March.
In an effort to combat the economic impact of the coronavirus pandemic, the Fed left interest rates at zero to 0.25 percent since March of 2020 until labor market conditions have reached levels consistent with the FOMC’s assessments of maximum employment.
The Australian stock market is significantly lower after being in the green most of the morning session on Thursday, extending the losses in the previous three sessions, with the benchmark S&P/ASX 200 falling below the 6,900 level, following the mixed cues overnight from Wall Street, as weakness in gold miners and technology stocks were partially offset by gains in energy and financial stocks.
Traders are reacting to the hawkish comments from the US Federal Reserve, which indicated that it plans to begin raising interest rates “soon,” citing elevated inflation and a strong labor market.
Trades also remain concerned about the sharp spike in domestic new coronavirus infections, though off record highs. New South Wales records 17,316 new cases and 29 deaths on Wednesday. Victoria reported 13,755 new cases and 15 deaths, Queensland recorded 11,600 new cases and 15 deaths, Tasmania reported 726 new cases, South Australia reported 1,953 new cases, and ACT reported 884 new cases.
The benchmark S&P/ASX 200 Index is losing 107.60 points or 1.55 percent to 6,854.40, after hitting a low of 6,758.20 and a high of 7,042.80 earlier. The broader All Ordinaries Index is down 116.80 points or 1.61 percent to 7,131.30. Australian markets ended sharply lower on Tuesday.
Among major miners, BHP Group and Rio Tinto are gaining almost 3 percent each, while Fortescue Metals is advancing almost 1 percent. OZ Minerals is edging down 0.3 percent and Mineral Resources is plunging more than 5 percent.
Oil stocks are higher. Woodside Petroleum is gaining more than 4 percent, Origin Energy is adding almost 2 percent, Beach Energy is surging almost 10 percent and Santos is advancing almost 4 percent.
Among the big four banks, Commonwealth Bank is edging up 0.2 percent, National Australia Bank is adding almost 1 percent, ANZ Banking is up more than 2 percent and Westpac is advancing more than 1 percent.
In the tech space, Xero is losing almost 5 percent, WiseTech Global is plunging more than 7 percent and Zip is declining more than 5 percent. Appen is edging up 0.2 percent.
Gold miners are weak as gold prices tumbled overnight. Newcrest Mining is losing more than 2 percent, Resolute Mining is declining more than 4 percent, Northern Star Resources is slipping almost 5 percent, Evolution Mining is plunging more than 9 percent and Gold Road Resources is down almost 1 percent.
In other news, shares in Kogan are plunging 11.5 percent after the online retailer posted a 9 percent increase in total gross sales, but a 4.4 percent drop in gross profit.
In economic news, Export prices in Australia were up 3.5 percent on quarter in the fourth quarter of 2021, the Australian Bureau of Statistics said on Thursday, slowing from 6.2 percent in the three months prior. On a yearly basis, export prices skyrocketed 38.3 percent. Import prices rose 5.8 percent on quarter, up from 5.4 percent in the previous three months. They were up 13.8 percent on year.
In the currency market, the Aussie dollar is trading at $0.708 on Thursday.
The Japanese stock market is sharply lower after paring early gains on Thursday, extending the losses in the previous four sessions, with the benchmark Nikkei 225 plunging almost 700 points to stay above the 26,300 level, following the mixed cues overnight from Wall Street, as the raging spread of the coronavirus omicron variant in the country worsens.
Traders are also reacting to the hawkish comments from the US Federal Reserve, which indicated that it plans to begin raising interest rates “soon,” citing elevated inflation and a strong labor market.
Trades also remain concerned about the sharp spike in domestic new coronavirus infections, with daily new COVID-19 cases in Japan surging to a new record on Wednesday after it topped the 70,000 mark to push hospitals and clinics to the breaking point. The daily new cases also hit record highs each day since last week.
The benchmark Nikkei 225 Index closed the morning session at 26,321.33, down 690.00 points or 2.55 percent, after hitting a low of 26,305.51 earlier. Japanese shares ended modestly lower on Wednesday.
Market heavyweight SoftBank Group is plunging more than 6 percent and Uniqlo operator Fast Retailing is losing almost 2 percent. Among automakers, Toyota is losing more than 1 percent, while Honda is edging up 0.2 percent.
In the tech space, Advantest is plunging more than 6 percent, Tokyo Electron is losing more than 4 percent and Screen Holdings is declining almost 5 percent.
In the banking sector, Mizuho Financial is edging down 0.5 percent and Sumitomo Mitsui Financial is edging down 0.2 percent, while Mitsubishi UFJ Financial is flat.
The major exporters are lower. Sony is losing almost 6 percent, Mitsubishi Electric is down more than 1 percent and Panasonic is declining almost 3 percent. Canon is flat.
In other news, shares in Japanese Marubeni Corp. are up more than 3 percent after the Japanese trading house said it will sell the grains business of its U.S. unit Gavilon to commodities trader Glencore PLC’s Viterra arm for $1.125 billion. Marubeni will retain Gavilon’s fertilizer business and some facilities for grain export.
Among the other major losers, CyberAgent is plunging more than 14 percent, Nitto Denko is sliding almost 7 percent, Sumco is losing more than 6 percent and Dowa Holdings is down more than 5 percent, while M3 and Recruit Holdings are declining almost 5 percent each. Toho Zinc and Fujitsu are slipping more than 4 percent each, while Bandai Namco, Nexon and Taiyo Yuden are down almost 4 percent each.
Conversely, Fanuc is gaining almost 4 percent.
In the currency market, the U.S. dollar is trading in the mid-114 yen-range on Thursday.
Elsewhere in Asia, South Korea is plunging 2.9 percent, Hong Kong is sliding 2.1 percent, New Zealand is losing 1.2 percent and China is slipping 1.1 percent, while Malaysia and Singapore are down 0.2 and 0.5 percent, respectively. Indonesia is bucking the trend and is up 0.2 percent. Taiwan is closed for the start of the Lunar New Year break and is off until February 4.
On Wall Street, stocks were mostly higher for much of the trading session on Wednesday but came under pressure in reaction to the Federal Reserve’s highly anticipated monetary policy announcement. The major averages all moved to the downside, although the Nasdaq managed to creep back above the unchanged line.
After surging as much as 3.4 percent, the tech-heavy Nasdaq pulled back well off its best levels but still inched up 2.82 points or less than a tenth of a percent to 13,542.12. Meanwhile, the Dow fell 129.64 points or 0.4 percent to 34,168.09 and the S&P 500 dipped 6.52 points or 0.2 percent to 4,349.93.
Meanwhile, the major European markets all moved sharply higher on the day. While the U.K.’s FTSE 100 Index jumped by 1.3 percent, the French CAC 40 Index and the German DAX Index surged up by 2.1 percent and 2.2 percent, respectively.
Crude oil futures settled higher on Wednesday as prices climbed amid rising geopolitical tensions. U.S. President Joe Biden has warned Moscow of damaging sanctions, including measures personally targeting President Vladmir Putin, if Russia invades Ukraine. West Texas Intermediate Crude oil futures for March ended higher by $1.75 or 2 percent at $87.35 a barrel, the highest settlement since October 2014.
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