Wall Street fell Friday, as Asian stocks followed Wall Street’s lead. This was due to fears that U.S. inflation rate hikes might slow down economic growth.
Shanghai, Hong Kong and Seoul declined. Tokyo edged up after trading resumed following a holiday.
Wall Street’s benchmark S&P 500 index fell 3.6% on Thursday, its largest one-day drop in two years. This was due to the loss of optimism that drove Wednesday’s rally.
Investors are concerned about the Federal Reserve’s ability to cool inflation. The Fed raised its key interest rates by half a point on Wednesday. This is without threatening the slowing U.S. economic recovery. Chairman Jerome Powell’s statement that the Fed was not considering larger increases temporarily encouraged traders.
Rob Carnell, ING reported that investors were having second thoughts about the Fed’s so-called dovish increase. It is likely that “rate increases will come thick and fast, with little to no prospect of inflation turning around any time soon.”
The Shanghai Composite Index dropped 1.6% to 3,019.11, and Hong Kong’s Hang Seng plummeted 3.6% to 20,051.61. Tokyo’s Nikkei225 saw 0.9% increase to 27,053.81.
Seoul’s Kospi fell 1.3% to 2,642.26, while Sydney’s S&P 200 slipped 2.3% to 7,197.40. New Zealand and Singapore both declined.
Investor unease is increasing due to Russia’s aggression on Ukraine, high oil prices, and disruptions in global supply chains.
Thursday’s increase in the benchmark rate by the Bank of England was the fourth since December. This is to reduce British inflation, which has been at its highest point for 30 years.
The S&P 500 dropped 3.6% to 4,146.87 on Wednesday, reversing Wednesday’s 3% gain.
The Dow Jones Industrial Average fell 3.1% to 32.997.97. The Nasdaq, which is dominated by tech stocks fell 5% to 12,317.69
On Thursday, the U.S. government was expected to release employment numbers. This is a highly watched data point.
BNP Paribas economists still expect that the Fed will continue to raise the federal funds rate to 3% to 3.255%. This is up from zero to 0.2% earlier in the year.
As the conflict in Ukraine continues, energy markets remain volatile and demand is high despite tight oil supplies. European governments are looking at an embargo to replace Russian energy supplies. Thursday’s decision by OPEC and allied oil-producing nations was to increase crude oil flows to the rest of the world.
In electronic trading on New York Mercantile Exchange, Benchmark U.S. crude oil gained 77c to $109.03 On Thursday, the contract increased 45 cents to $108.26. Brent crude oil, which is the price base for international oil trading, rose 75 cents to $111.65 per barrel in London.
From Thursday’s 130.40yen, the dollar rose to 130.47yen. From $1.0519, the euro rose to $1.0539.
