Asia-Pacific Markets Mostly Lower Over Fed Fears

On Monday, the shares in the Asia-Pacific markets were trading mostly lower, as there was a re-emergence of concerns about the aggressive hikes from the US Fed.

But, there was a rise in Chinese markets, after the country’s central bank reduced its benchmark lending rates.

Asian markets

The Hang Seng index in Hong Kong saw a drop of 0.6% in the final hour of trading. Even after trimming some of its losses, the Nikkei 225 index in Japan fell 0.47% to reach 28,794.5.

There was also a 0.1% drop in the Topix index, as it came down to 1,992.59. The Kospi index in South Korea dropped 1.21% to reach 2,462.5 and a 2.5% loss in the Kosdaq brought it down to 795.87.

The Australian S&P/ASX 200 index also dipped 0.95% to end the trading session at 7,046.9. The MSCI’s index of Asia-Pacific shares excluding Japan fell by 0.95%.

The latest speakers of the Fed continued to stress that there will be more rate hikes in the near future, as they have not yet won the fight against inflation.

Therefore, investors have now turned their focus toward the annual Jackson Hole symposium that will begin stateside on Thursday and the Fed chairman, Jerome Powell, is scheduled to speak.

His comments are expected to shed some light on future interest rate hikes, depending on how hawkish his stance may turn out, even though investors had hoped he would be dovish.

China markets rise

There was a 0.61% rise in the Shanghai Composite, as it reached 3,277.79, while a 1.19% gain in the Shenzhen Component saw it reach 12,505.68.

The People’s Bank of China (PBoC) announced the reduction of its benchmark lending rate for one year by 5 basis points, while its five-year rate was cut by 15 basis points.

This means that the one-year prime rate now stands at 3.65%, while the LPR for five years is now at 4.3%.

Market analysts said that the asymmetric cuts were aimed at providing support for long-term borrowing, particularly mortgages, given the crisis in China’s policy market.


Christian Hawkesby, the Deputy Governor of the Reserve Bank of New Zealand (RNBZ), said that policymakers in the country want to see interest rates above neutral in order to combat inflation.

Last week, the RNBZ hiked up its cash rate by 50 basis points. The Deputy Governor said that the central bank had also debated over a 25 or 75 basis points increase in the interest rate.

He asserted that pushing the cash rate above neutral would be helpful in bringing down inflation and also provide everyone some breathing space in order to assess how the economy is faring.

He added that once they hike up the cash rate to somewhere around 4% to 4.25%, then things would become evenly balanced. Therefore, they are in favor of pushing up the OCR.

Hawkesby also acknowledged that the policymakers were aware that the economy would cool down as a result and that there were uncertainties in the future.

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