Asian Shares Falter On Fed Chief's 'Harsh' Rate Policy Works

Asian shares declined Monday after the head of the US Federal Reserve indicated high interest rates will continue for some time to curb inflation. The plunge in Asia paralleled the drop on Wall Street, where the Dow Jones Industrial Average ended the week sinking more than 1,000 points.

Photo Insert: A slowdown in the US is damaging to Asia’s export-reliant economies. Oil prices rose.

A slowdown in the US is damaging to Asia’s export-reliant economies. Oil prices rose.

The message from Federal Reserve Chair Jerome Powell in a speech Friday had been expected, though some had wished it was less emphatic, Yuri Kageyama reported for the Associated Press (AP) on Aug. 29, 2022.

“The market apparently was looking for something a little more neutral. After all the talk of a ‘pause’ and ‘pivot,’ none of which ever made any sense with a Fed that has said several times it will keep hiking rates even if it means some economic pain, we are back to square one with a Fed outlook to keep tightening,” said Clifford Bennett, chief economist at ACY Securities.

“The Fed was always going to keep raising rates aggressively, but the market decided to price in a slowing in hikes, and even a reversal.”

Japan’s benchmark Nikkei 225 dipped 2.7% in afternoon trading to 27,881.87. Australia’s S&P/ASX 200 dropped 2.0% to 6,965.50. South Korea’s Kospi slipped 2.2% to 2,427.28. Hong Kong’s Hang Seng slid 0.8% to 20,004.49, while the Shanghai Composite recouped earlier losses to inch up less than 0.1% at 3,237.82.

The S&P 500 fell 141.46 points, or 3.4%, to 4,057.66. The benchmark index is now down almost 15% for the year. The Dow lost 1,008.38 points, or 3%, to close at 32,283.40. The last time the blue-chip average had a 1,000-point drop was in May.

The Nasdaq slid 497.56 points, or 3.9%, to 12,141.71, its biggest drop since June. The Russell 2000 index of smaller companies fell 64.81 points, or 3.3%, to finish at 1,899.83. In energy trading, benchmark U.S. crude rose 67 cents to $93.73 a barrel.

Brent crude, the international standard, added 36 cents to $101.35 a barrel. In currency trading, the US dollar rose to 138.80 Japanese yen from 137.75 yen. The euro was little changed at 99 cents.

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