Tue. Jan 31st, 2023

Global markets followed U.S. stocks lower on Thursday, after Federal Reserve officials signaled their intention to raise interest rates sooner than previously forecast.

By late morning Hong Kong time, Japan’s Nikkei 225 and Australia’s S&P/


200 had fallen 1.3% and 0.1% respectively, while Korea’s Kospi Composite retreated 0.6%. Taiwan’s Taiex declined 0.3%.

The Shanghai Composite and Hong Kong’s Hang Seng bucked the trend, both inching up 0.2%.

U.S. stock futures pulled back, suggesting that American markets could fall for a second day. Futures tied to the S&P 500 futures and the Dow Jones Industrial Average both lost 0.4% while Nasdaq-100 futures shed 0.3%. On Wednesday, the three key U.S. indexes fell between 0.2% and 0.8%.

Federal Reserve officials said Wednesday that they expect higher interest rates by late 2023, as the pandemic-ravaged economy recovers rapidly and inflation heats up.

A strong U.S. economy means that inflation will be quicker, as there is a clear demand for labor, said

Kerry Craig,

global market strategist at J.P. Morgan Asset Management.

“The markets are coming round to reality on that,” he said.

Mr. Craig expects the American central bank to start talking about plans to taper its current bond-buying program in September, and start scaling back early next year, followed by one increase in interest rates by the end of 2023.

The WSJ Dollar Index, which measures the U.S. dollar against a basket of other currencies, dipped slightly to 86.28, after recording its largest one-day point gain in more than a year on Wednesday.

A stronger dollar will create pressure for Asian stocks in the very near term, said Mr. Craig, but that will fade over the course of this year as a strong U.S. economy will boost global demand and bolster earnings outlooks for companies.

The yield on the benchmark 10-year Treasury note was little changed in Asian trading hours on Thursday, rising to 1.570% from 1.569% on Wednesday. Bond yields rise as prices fall.

Write to Chong Koh Ping at [email protected]

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