Hong Kong stocks fall most in two weeks as Fed’s hawkish interest-rate comments, sell-offs in Asia rattle investors
- Hang Seng Index ends 1.1 per cent lower on Monday, capping the biggest drop since June 3
- Japan’s Nikkei 225 tops Asian benchmarks’ decline with a drop of more than 3 per cent
The Hang Seng Index closed 1.1 per cent lower at 28,489 on Monday, posting the biggest drop since June 3. That added to a stretch of three consecutive weekly declines. China’s Shanghai Composite Index bucked the turmoil to eke out a 0.1 per cent gain, after the nation’s loan prime rate was kept unchanged for the 14th consecutive month.
Rattling the nerve of traders was the comment by St Louis Fed president James Bullard, who told CNBC that interest rates may move higher next year on inflation risks. His rhetoric was harsher than the earlier projection by other Fed officials who projected that the increase in borrowing costs will probably come in 2023. Fed chairman Jerome Powell said last week that the US central bank had begun to mull curtailing bond purchases, but discussion about raising interest rates was still “premature.”
“The economy will likely see an inflation overshoot and if financial stability is threatened over the next couple of years, that could complicate Fed tightening,” said Edward Moya, an analyst at Oanda. “Stock market volatility will remain elevated.”
Short-maturity US bonds fell, alongside commodities like copper, while the US dollar, a proxy for safe assets, ticked up.