China stocks hit 10-month low on hawkish US Fed stance
China and Hong Kong stocks slipped further on Thursday as risk sentiment was hit after the US Federal Reserve signalled another rate hike by year-end and much tighter monetary policy through 2024 than previously expected.
China’s blue-chip CSI 300 Index declined 0.9 percent to close at its lowest since November 2022, while Hong Kong’s Hang Seng Index fell 1.3 percent.
Asian stocks followed Wall Street’s lacklustre lead, dipping across the board as the Fed stiffened its hawkish monetary policy stance, pressuring markets.
The Fed held interest rates steady, as expected, on Wednesday. But it raised its end-2024 and 2025 dot plot projections by 50 bps each, essentially signalling “higher-for-longer” rates, Nomura analysts said in a note.
“Rising US bond yields, stronger USD and elevated energy prices – all are ingredients for a bad recipe for Asian stocks,” Nomura said.
European stock markets slide at open
European stock markets slid at the start of trading on Friday, with traders expecting interest rates to stay high for longer than expected.
London’s benchmark FTSE 100 index fell 0.3 percent to 7,658.44 points, one day after the Bank of England froze borrowing costs but warned it could hike again should inflation stay elevated.
In the eurozone, Frankfurt’s DAX index shed 0.5 percent to 15,489.09 points and the Paris CAC 40 slumped 1.0 percent to 7,142.44.
Hong Kong stocks open with another loss
Hong Kong shares extended the week’s losses at Friday’s open following hefty losses in New York and Europe as traders grow increasing concerned about the likelihood central banks will keep hiking interest rates.
The Hang Seng Index dipped 0.44 percent, or 77.15 points, to 17,578.26.
The Shanghai Composite Index was flat, inching up 0.06 points to 3,084.76, while the Shenzhen Composite Index on China’s second exchange eased 0.12 percent, or 2.23 points, to 1,875.41.
Australian shares fall
Australian shares dropped more than 1 percent on Friday and were on track for their worst week in over a year, as the US Federal Reserve indicating that interest rates would remain higher for longer than expected weighed on sentiment.
The S&P/ASX 200 index retreated 1.2 percent to 6,978.5 by 0038 GMT, set for a fifth session of declines.
For the week, it fell 4.3 percent, on track for its worst week since June 17, 2022.
Globally, investor sentiment was dampened after the US Federal Reserve earlier this week struck a more hawkish tone than expected and signalled another rate hike this year and more stringent monetary policy through 2024 to fight inflation.
In Australia, focus now shifts to August inflation and retail sales data due next week for insights into how the economy has adjusted to the aggressive rate hikes by the central bank. Heavyweight mining stocks dropped 1.6 percent in a fifth straight session of declines, on track for their worst day since Sept. 7.
Indian shares inch up
India’s benchmark indexes took a breather on Friday, edging up on the back of gains in banks and financials following a more than 2 percent drop during the week.
The Nifty 50 was up 0.2 percent at 19,782 points as of 09:22 a.m. IST, while the S&P BSE Sensex rose 0.3 percent to 66,392 points.
The indexes are on course for their first weekly decline in four.
Asia stocks find footing
The Japanese yen slipped on Friday after the Bank of Japan (BOJ) stuck to ultra-easy monetary policy and made no changes to its outlook, while stocks and bonds were kept under pressure as investors hunkered down for US interest rates to stay high.
Benchmark 10-year Treasury yields hit a 16-year high of 4.503 percent.
The BOJ, as expected, maintained super-low interest rates, left its yield control policy unchanged, signalling it was in no rush to phase out its massive monetary stimulus.
Governor Kazuo Ueda is due to give a news conference at 0630 GMT.
Japan’s Nikkei cuts losses
Japan’s Nikkei share average cut early losses after the Bank of Japan kept stimulus unchanged on Friday and signalled it was in no rush to tighten policy.
The benchmark index had earlier dipped to a nearly four-week low, tracking sharp declines on Wall Street amid worries about a more hawkish Federal Reserve.
The Nikkei was down 0.28 percent at 32,481.02, as of 0333 GMT, shortly after trading resumed for the afternoon session. The broader Topix was down 0.28 percent, compared with a 0.64 percent drop as of the midday recess.
In a statement accompanying the decision, the BOJ repeated a pledge to keep ultra-loose monetary policy “as long as necessary to maintain the (2 percent inflation) target in a stable manner.”
Nasdaq, S&P hit 1-month lows
The S&P 500 and the Nasdaq dropped to a more than one-month low on Thursday as a jump in Treasury yields knocked down growth stocks after the Federal Reserve signaled another rate hike this year.
Rate-sensitive stocks including Tesla, Meta Platforms, Amazon.com, Alphabet, and Nvidia fell between 1.9 percent and 3.3 percent as the two-year and 10-year Treasury yields scaled multi-year highs. Semiconductor firm Broadcom fell 3.7 percent, pulling the Philadelphia chip index down 1.2 percent, after a report showed Google executives had discussed dropping the company as a supplier of artificial intelligence chips as early as 2027.
Consumer discretionary led a broad-based decline in the major S&P 500 sector indexes, down 2.2 percent.
The Fed delivered a widely anticipated pause on Wednesday, though its updated quarterly projections showed benchmark rate could be hiked one more time in 2023 to a peak range of 5.50 percent-5.75 percent, while monetary policy could stay tighter than was expected through 2024.