Asian markets follow Wall St down as traders eye Fed meeting
Equities sank in Asian trade Monday
following another painful sell-off on Wall Street, with investors' focus on the
Federal Reserve's next policy meeting this week, where officials are expected
to unveil their plans to battle soaring inflation.
Tech firms -- which soared on the
back of the pandemic -- led the retreat in New York after weak subscriber
figures from Netflix fuelled concerns that the end of lockdowns and reopening
of economies is seeing consumers changing their spending habits.
That comes as traders contemplate
the end of the ultra-loose monetary policies put in place by central banks in
early 2020 to cushion the impact of the Covid containment measures, with the
Fed expected to start lifting interest rates from March.
Minutes from the Fed's December
gathering indicated officials were turning more hawkish as they grow
increasingly concerned about inflation, which is sitting at a four-decade high.
Commentators have tipped the first
increase in borrowing costs in March followed by another three hikes before the
end of the year, while the central bank is also forecast to start running down
its vast bond-holdings that have helped keep rates down.
Economists at Goldman Sachs said at
the weekend they saw increases in March, June, September and December, with
July as the start of the Fed's balance sheet reduction but warned inflation
pressures meant "risks are tilted somewhat to the upside of our baseline".
They also said they were concerned
the virus would continue to cause supply-demand imbalances while strong wage
growth was also a worry, suggesting inflation would remain an ongoing problem.
"We see a risk that the (policy
board) will want to take some tightening action at every meeting until that
picture changes," the economists said. "This raises the possibility
of a hike or an earlier balance sheet announcement in May, and of more than
four hikes this year."
The prospect of tighter policy has
battered markets in recent weeks, with the Nasdaq in New York down about 15
percent from its recent peak -- tech firms are considered more susceptible to
higher rates. The S&P 500 is down more than eight percent from a record
high touched at the start of the month, and observers said it could see even
more losses in coming weeks.
The selling filtered through to
Asia, with Hong Kong and Seoul each down more than one percent, while Tokyo,
Shanghai, Sydney, Singapore, Wellington, Taipei, Manila and Jakarta were also
deep in the red.
Still, oil prices rallied on
optimism that demand will improve as countries reopen and the Omicron variant
shows signs it may be peaking, allowing people to travel more freely and
providing a boost to consumption.
"Physical market demand is
strong, as is optimism over Covid turning endemic," Vandana Hari, of Vanda
Insights, said.
"Oil's narrative remains
bullish, pointing to continued strength in prices interrupted by mild
pullbacks."