Asian shares decline after Fed chief’s comments on inflation

TOKYO –

Asian shares dropped Friday in response to Wall Street losses after Jerome Powell, the Chair of the Federal Reserve, indicated that interest rates should rise faster to combat inflation.

Asia’s major indexes fell, with Tokyo experiencing a nearly 2% drop in its indexes. The consumer price index data from Japan showed an increase in Japan for the seventh consecutive monthly, but the results were still within market expectations.

Japan’s benchmark Nikkei 225 dipped 1.9% to 27,033.33. Australia’s S&P/ASX 200 dropped 1.6% to 7,468.30. South Korea’s Kospi shed 1.2% to 2,696.72. Hong Kong’s Hang Seng slipped 1.1% to 20,454.17, while the Shanghai Composite edged down 0.3% to 3,071.63.

Japanese Finance Minister Shunichi Suzuki made comments seen as a slightly more forceful pushback against “sudden movements” in exchange rates after meeting with Treasury Secretary Janet Yellen on the sidelines of G20 finance ministers’ meetings.

The U.S. Dollar rose to 128.57 Japanese Yoen on Friday morning, from 128.36. The euro is now US$1.0842, up slightly from $1.0840.

A possible intervention, especially from the U.S. saidStephen Innes, SPI Asset Management

“The BOJ is likely to remain steadfast in its approach to ultra-dovish monetary policy relative to its peers that implicitly welcomes yen depreciation,” he saidRefers to Japan’s central banking institution.

However, the primary reason why the dollar has risen against the Japanese yen and other currencies is the growing gap in interest rates between Japan and other Asian countries and rising U.S. rate of interest.

Jerome Powell, Fed Chair, participated in a panel discussion hosted by the International Monetary Fund. saidThe Fed must respond to high inflation faster than before. Therefore, sharp interest rate hikes are likely in the months ahead.

Wall Street stocks dropped after Powell’s comments. The S&P 500 closed 1.5% lower at 4,393.66 after having been up 1.2% in the early going. The Dow Jones Industrial Average declined 1% to 34.792.76 while the Nasdaq dropped 2.1% at 13,174.65.

Stocks of smaller companies fell more than those in the wider market. The Russell 2000 lost 2.3% to 1,991.46.

“Under the weight of war, global energy and food risk, equity markets may well begin to buckle, unfortunately in a rather spectacular manner. We have been saying for some time that the only way to protect your investment portfolio is to be cautious on equities and buying gold, oil and the U.S. dollar,” said Clifford Bennett, chief economist at ACY Securities.

The broader market has had a choppy week as investors review the latest round of corporate earnings amid lingering concerns about rising inflation and the Fed’s shift away from an ultra-low interest rate policy.

Wall Street expects a halo percentage rate rise at the Fed’s next meeting, which will be held in two weeks. To limit the effect of rising prices on consumers and businesses, other central banks have also raised interest rates.

During the panel discussion Thursday, Powell suggested that “there’s something in the idea of front-loading” aggressive rate hikes as the Fed grapples with inflation that has reached a four-decade high.

This suggests that a half-point rate hike could be in the cards when Fed officials hold their next economic policy and interest rate meetings May 3-4, Powell said. The Fed has increased its benchmark short-term rate in the past by a smaller quarter-point increase.

More than 80% of the stocks in the S&P 500 fell Thursday, with technology stocks accounting for a big share of the decline. Many of the larger technology companies have high valuations that give them greater control over the direction of the wider market. Microsoft declined 1.9% while Nvidia, a chipmaker, fell 6%.

American Airlines gained 3.8% from investors after it told them that it expects a profit in its second quarter due to more people returning to travel.

Tesla rose 3.2% following strong sales reports by the maker of solar panels, electric cars, and solar panels. Profits increased sevenfold despite problems in global supply chains.

As investors look for higher interest rates, bond yields are gaining ground. From 2.92% on Thursday, the yield on the 10-year Treasury increased to 2.97% Friday. The yield on the 10-year Treasury is hovering close to its highest level since late 2018.

Benchmark U.S. crude oil fell 65c to $103.14 per barrel. The crude oil price rose 1.6% Thursday, and is now up about 40% for the year. This has led to gasoline becoming more expensive which has a deeper impact on consumers’ wallets. Brent crude, which is the international standard for oil, dropped 64 cents to $107.69 per barrel.

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AP Business Writers Alex Veiga, Damian J. Troise, and Damian J. Troise all contributed.