Asian shares slide as fears over hawkish Fed mount
A man wearing a protective mask, amid the COVID-19 outbreak, walks past an electronic board displaying graphs of Nikkei index outside a brokerage in Tokyo, Japan on Mar 10, 2022. (File photo: Reuters/Kim Kyung-hoon)
SINGAPORE: Asian shares eased on Friday (Dec 23), tracking a dive on Wall Street, while the dollar firmed as strong US data revived fears the Federal Reserve will have to retain its hawkish stance to tame inflation.
MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.69 per cent, snapping a two-day winning streak. Wall Street's major averages closed lower on Thursday with the technology-heavy Nasdaq dropping 2 per cent.
Australia's S&P/ASX 200 index lost 1.01 per cent, while Japan's Nikkei opened 1 per cent lower.
US weekly jobless claims data pointed to a still tight labour market, while the economy rebounded faster than previously estimated in the third quarter.
The data from the US "flamed fears that further monetary policy tightening in 2023 will be necessary to cool inflation", said Tony Sycamore, a market analyst at IG.
The slew of data, which would normally be viewed positively, has fuelled investor fears that the Fed funds target rate could rise higher and stay there longer than previously expected, raising the possibility of an economic contraction.
China stocks opened lower, while the Hong Kong stock market also fell on recession worries as China grappled with a surge in infections after Beijing abandoned its strict zero-COVID policy to contain the virus.
In the currency market, the Japanese yen weakened 0.20 per cent versus the US currency at 132.61 per dollar, but was on track for its third largest weekly gain this year of more than 3 per cent, after the central bank stunned markets on Tuesday by tweaking its policy on government bonds.
"Investors should prepare themselves for rapid yen appreciation against the dollar once the market sees monetary policy in Japan and the US flipping direction," Mizuho analysts said.
The spike in the Asian currency came after Bank of Japan's surprise tweak on Tuesday to allow the 10-year bond yield to move 50 basis points either side of its 0 per cent target, wider than the previous 25 basis point band.
Data on Friday showed Japan's core consumer inflation in November hit a fresh 40-year high of 3.7 per cent as companies continued to pass on rising costs to households, casting doubts on the BOJ's view that recent cost-push inflation will prove temporary.
The latest inflation numbers are likely to keep alive market expectations the central bank will further roll back its massive stimulus next year, according to analysts.
The dollar index, which measures the greenback against six other currencies, fell 0.057 per cent to 104.32. The euro was up 0.16 per cent to US$1.061. Sterling was last trading at US$1.2034, down 0.07 per cent on the day.
Meanwhile, oil prices rose on expectations of lower Russian crude exports from the Baltic region in December, offsetting worries that a looming Arctic storm across the United States could snuff out transport fuel demand growth this holiday season.
US crude rose 1.14 per cent to US$78.37 per barrel and Brent was at US$81.82, up 1.04 per cent on the day.
Spot gold added 0.1 per cent to US$1,793.64 an ounce.
