Benchmark indexes across Asia fall after US central bank raises key rate to the highest level in 15 years.

Published On 3 Nov 2022

Asian stock markets have tumbled after the United States Federal Reserve added to recession fears by saying it was not finished raising the country’s interest rates to cool inflation.

Hong Kong’s benchmark lost 3.1 percent on Thursday, while Shanghai, Seoul and Sydney also followed Wall Street lower after the Fed raised its key rate to the highest level in 15 years.

Oil prices fell while the euro stayed below 99 cents.

Wall Street’s benchmark S&P 500 index plunged 2.5 percent after the Fed raised its short-term lending rate by 0.75 percentage points, three times its usual margin, for the fourth time this year.

Fed Chair Jerome Powell reinforced expectations of more rate hikes, saying “we have a ways to go”. He said it would be “very premature” to consider pausing.

“Recession risks are rising, but that is the price the Fed is prepared to pay to get inflation under control,” said James Knightley, Padhraic Garvey and Chris Turner of ING in a report.

The Hang Seng in Hong Kong shed 488 points to 15,338.85 and Sydney’s S&P-ASX 200 fell 1.9 percent to 6,855.40.

The Shanghai Composite Index slipped 0.2 percent to 2,997.46. Japanese markets were closed for a holiday.

The Kospi in Seoul fell by 0.6 percent to 2,322.11. New Zealand and Southeast Asian markets also fell.

The Fed and central banks in Europe and Asia have raised rates aggressively this year to stop inflation, which is running at multi-decade highs. Investors worry that might tip the global economy into recession.

Consumer prices in the US rose 6.2 percent over a year in September, the same as the previous month. But core inflation, which excludes volatile food and energy prices to give a clearer picture of the trend, accelerated to 5.1 percent from August’s 4.9 percent.

The Fed said Wednesday it could shift to a more deliberate pace of rate hikes and would consider the overall economic effect.

On Wall Street, the S&P 500 fell to 3,759.69. The Dow Jones Industrial Average lost 1.5 percent to 32,147.76. The Nasdaq composite slid 3.4 percent to 10,524.80.

Tech stocks, retailers and healthcare companies were among the biggest declines.

Apple, Inc. fell 3.7 percent, Amazon.com, Inc. dropped 4.8 percent and Johnson & Johnson, Inc. slipped 1.5 percent.

Investors hope signs housing sales and other activity are weakening might encourage Fed officials to ease rate hike plans. But the latest data, especially on hiring, are relatively strong, a sign the Fed might stay aggressive.

The US government is due to release unemployment data Thursday and a report on the broader jobs market on Friday.

In energy markets, benchmark US crude lost 43 cents to $89.57 in electronic trading on the New York Mercantile Exchange. The contract rose $1.63 to $90 on Wednesday.

Brent crude, the price basis for international oil trading, fell 27 cents to $95.89 per barrel in London. It rose $1.51 the previous session to $96.16 a barrel.

The US dollar gained to 147.33 Japanese yen from Wednesday’s 146.94 yen. The euro declined to 98.26 cents from 98.83 cents.