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Asian stocks tumble after Fed says US rates will hike ‘soon’ | Economic news

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By JOE McDONALD, AP Business Writer

BEIJING (AP) — Asian stock markets fell by unusually wide margins on Thursday after the Federal Reserve indicated it plans to start raising interest rates soon to calm inflation.

The Tokyo market benchmark fell more than 3%. Hong Kong and Seoul lost more than 2%.

Wall Street’s benchmark S&P 500 lost 0.1% on Wednesday after a Fed statement said the U.S. central bank “expects it to be appropriate soon” to raise rates. Investors expect four rate hikes this year, starting in March. The Fed said monthly bond purchases that lower long-term rates by pumping money into the financial system would be phased out in March.

“The Fed’s decision will reverberate globally, which means the era of low interest rates, ultra-low interest rates is over,” Geo Securities CEO Francis Lun said at Hong Kong. “All central banks will start fighting inflation instead of trying to stimulate the economy.

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The Nikkei 225 in Tokyo fell 3.2% to 26,152.12 and the Hang Seng in Hong Kong fell 2.6% to 23,664.80.

The Kospi in Seoul fell 2.9% to 2,630.78 after a stunning market debut for battery maker LG Energy Solutions, whose shares opened at nearly double their offer price of 300,000. won ($250) after an initial public offering that attracted 13 trillion won (nearly $11 billion). ) in offers.

LG Energy was the world’s second-largest maker of electric car batteries behind China’s CATL in the first 11 months of last year with a market share of around 22%, according to South Korean market research firm SNE. Research. The good prospects for sales of electric vehicles reinforce the attractiveness of the company.

The company’s shares closed at 505,000 won ($420). The stock market debut made LG Energy the second most valuable company in the country by market capitalization behind tech giant Samsung Electronics.

Samsung shares fell 2.1% on Thursday after announcing that its operating profit for the last quarter rose more than 53% from the same period last year as it thrived during the pandemic while relying on its dual strength in parts and finished products.

The Shanghai Composite Index was down 0.9% at 3,425.28 and Sydney’s S&P-ASX 200 was down 2% at 6,822.10.

The India Sensex opened 1.8% lower at 56,809.30. New Zealand and Southeast Asian markets also declined.

On Wall Street, the S&P 500 slipped to 4,349.93 after rising 2.2% ahead of the Fed’s announcement.

The Dow Jones Industrial Average fell 0.4% to 34,168.09. The Nasdaq composite was little changed at 13,542.12, shedding a 3.4% gain earlier in the day.

Wall Street rose immediately after the Fed statement, but major indexes gave up gains as Chairman Jerome Powell asked questions about how and when the central bank will let its balance sheet shrink after buying trillions of dollars in bonds during the pandemic. This would put upward pressure on market interest rates.

The selloff accelerated as Powell acknowledged that the high inflation that has weighed on businesses and consumers is not getting better. This could force the Fed to become even more aggressive in raising rates and removing support from the markets.

The last time the Fed raised rates and reduced its balance sheet at the same time was in late 2018. The S&P 500 lost almost 20%.

“Since the December meeting, I would say the inflation picture is about the same but probably slightly worse,” Powell said. “It hasn’t improved. It probably got a little worse, and that’s the trend.

Powell also said there was room to raise interest rates without hurting the labor market, and would not rule out the possibility that the Fed could raise short-term rates during one of its seven meetings remaining this year or opt for a larger-than-usual increase at one of them.

The Fed’s near-zero interest rates have helped lift stock prices for nearly two years, but markets have been volatile since Powell and other officials said in mid-December that plans to Reduced economic stimulus could be accelerated to combat soaring inflation.

In energy markets, benchmark U.S. crude fell 73 cents to $86.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.75 to $87.35 on Wednesday. Brent crude, the price base for international oils, fell 72 cents to $88.02 a barrel in London. It advanced $1.76 the previous session to $89.96.

The dollar rose slightly to 114.67 yen from 114.55 yen on Wednesday. The euro fell to $1.1223 from $1.1254.

Kim Tong-hyung in Seoul and Alice Fung in Hong Kong contributed.

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