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15 June, 2018 08:48:20 AM

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Asian markets lower after hawkish Fed, fresh trade war fears

Independent Online Desk
Asian markets lower after hawkish Fed, fresh trade war fears
People walk by an electronic stock board of a securities firm in Tokyo yesterday. Asian stock markets slumped yesterday with South Koreans stocks plunging 1.6 per cent on the first day of trading after an unprecedented summit between leaders of North Korea and the United States. AP Photo

Asian markets fell yesterday after the Federal Reserve hiked interest rates and signalled a more hawkish tone for future moves, while US President Donald Trump stoked trade war fears by suggesting he will hit China with fresh tariffs, reports AFP from Hong Kong.

After a keenly watched meeting, the US central bank lifted borrowing costs, as expected, but indicated another two this year and four in 2019 as the world's top economy continues to improve and inflation picks up.

While the Fed had earlier been tipped to announce three increases each year, there had been growing speculation that it would have to be more aggressive to keep a lid on prices and prevent the economy from boiling over.

Policymakers have been forced to change tack to take account of Trump's huge tax cuts in December, which have already started to take effect.

But in a statement they stressed that rising rates were unlikely to hit the economy, which Fed chief Jerome Powell said was "in great shape".

All three main indexes on Wall Street ended down on the prospect of higher borrowing costs, which would affect investment, while the dollar was slightly weaker as traders had largely priced in further hikes.

And Asian markets struggled, with signs of a slowdown in Chinese growth also denting sentiment after data showed factor output, retail sales and investment all missing forecasts.

Hong Kong ended down 0.9 per cent. The city's de facto central bank lifted its own interest rates to keep in line with the Fed.

The HKMA and US central bank's monetary policies are linked owing to their currency peg.

Shanghai lost 0.2 per cent, with analysts saying a People's Bank of China decision not to follow the Fed's rate rise indicated officials may be changing policy to combat slowing growth.

The central bank usually tracks US hikes by lifting the amount it charges to lend to banks in order to prevent a flood of cash from the mainland into dollar investments.

"China's new leadership was greeted by a much more challenging environment in 2018," said Ting Lu, chief China economist at Nomura investment bank, adding Beijing would likely lower rates and pick up spending in coming months to shore up growth.

Tokyo ended one per cent lower, Seoul fell 1.8 per cent, Sydney dipped 0.1 per cent and Singapore was off 1.1 per cent.

SI

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Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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