Bangkok, April 7 (BNA): Asian stocks tracked a decline on Wall Street after details from the Federal Reserve’s meeting last month showed that the central bank plans to be firm in the fight against inflation.
The Federal Reserve’s comments added to investor anxiety about the war in Ukraine, the coronavirus outbreak in China and persistently high inflation, the Associated Press reports.
Benchmarks fell on Thursday in all major regional markets. US futures fell while oil prices were higher.
The minutes of the meeting three weeks ago showed that federal policymakers agreed to begin reducing the central bank’s stockpile of Treasuries and mortgage-backed securities by about $95 billion per month, starting in May. That’s more than some investors expected and almost double the pace the last time the Fed trimmed its balance sheet.
At the meeting, the Fed raised its benchmark short-term interest rate by a quarter of a percentage point, its first increase in three years. The minutes showed that several Fed officials wanted to raise interest rates by a larger margin last month, and still see “one or more” of these huge increases likely to come at future meetings.
Higher rates tend to lower the price-earnings ratio for stocks, which is a key valuation metric. Such a scenario could particularly hurt stocks seen as the most expensive, which includes big tech companies.
Tokyo’s Nikkei 225 lost 1.9% to 26,858.32 while Hong Kong’s Hang Seng lost 1.3% to 21,791.30. The Shanghai Composite Index fell 1% to 3,251.06. South Korea’s Kospi fell 1.4% to 2696.64 and Australia’s S&P/ASX 200 fell 0.6% to 7,449.10.
Overnight, the S&P 500 fell 1% to 4,481.15, adding to its losses incurred the day before. The Dow Jones Industrial Average fell 0.4% to 34496.51, and the Nasdaq Tech Index lost 2.2% to 13,888.82.
Small-cap stocks also fell, sending the Russell 2000 Index down 1.4% to 2016.94.
Technology stocks were the biggest drag on the S&P 500. Apple fell 1.8% and Microsoft fell 3.7%.
Telecom companies, retailers and others who rely on direct consumer spending also weighed heavily on the index. Amazon shares fell 3.2% and Facebook’s parent Meta shares fell 3.7%.
Investors are focused heavily on Federal Reserve policy as the central bank moves to reverse low interest rates and the exceptional support it began providing the economy two years ago when the pandemic pushed the economy into recession.
A faster reduction in the Federal Reserve’s balance sheet would help raise long-term interest rates, but it would also increase borrowing costs for consumers and businesses.
The yield on the 10-year Treasury rose to 2.61% after the minutes were released, up from 2.54% late Tuesday.
Early Thursday, the yield, which is used to set interest rates on mortgages and many other types of loans, was at 2.58%. He’s been at the highest level for three years.
Traders are now pricing in a roughly 77% probability that the Federal Reserve will raise its key rate overnight by half a percentage point at its next meeting in May. That’s double the usual amount and something the Fed hasn’t done since 2000.
Inflation has reached its highest level in four decades and threatens to derail economic growth. Price hikes on everything from food to clothing have raised fears that consumers will eventually pull back from spending. The Russian invasion of Ukraine added to those fears, sending energy and commodity prices, including wheat, higher.
US benchmark crude oil prices fell 5.6% on Wednesday, but are up more than 30% for the year. This has driven up gasoline prices, putting more pressure on freight costs, commodity prices and consumer wallets.
On Thursday, the price of the US benchmark crude rose $1.60 to $97.83 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing benchmark, jumped $1.87 to $102.94 a barrel.
Treasury Secretary Janet Yellen warned a House committee on Wednesday that the conflict would have “enormous economic ramifications in Ukraine and beyond.”
Western governments plan to ban new investors in Russia after evidence of its soldiers deliberately killing civilians in Ukraine. The US Treasury said President Vladimir Putin’s government will be prevented from paying dollar debts from US financial institutions, which could raise the risk of default.
European governments have resisted calls to boycott Russian gas, Putin’s largest source of exports, due to the potential impact on their economies.
The dollar fell to 123.64 yen from 123.81 yen. The euro rose to $1.0897 from $1.0985.