BANGKOK (AP) — Asian shares skidded Thursday after a retreat on Wall Street as markets registered their dismay over the Federal Reserve’s warning that still higher interest rates are in store following its latest increase.
Oil prices fell, while U.S. futures edged upward.
Japan reported that its November trade deficit was more than 2 trillion Japanese yen ($15 billion). This is due to rising oil prices and a weaker yen, which pushed imports higher. It was the 16th straight month with red ink and a record-setting November month.
Tokyo’s Nikkei225 fell 0.4% to 28,051.70, while the Hang Seng in Hong Kong dropped 0.9% to 19,498.32. The Kospi Seoul lost 1.3% to 2,367.91.
The Shanghai Composite index edged 0.1% lower to 3,173.21 and Australia’s S&P/ASX 200 shed 0.6% to 7,204.80.
In Mumbai, shares rose while those in Taiwan and Bangkok saw their shares fall.
The U.S. central banking system performed as expected. raised its key short-term rate On Wednesday, it was up 0.50 percent. This was the seventh increase this year. It also stated that the Fed expects rates will rise more in the future than it anticipated.
Recent signs of inflation easing have sparked optimism that the Fed may signal the possibility for rate cuts in second half next year. But during a press conference, Fed Chair Jerome Powell emphasized that the full effects of the central bank’s efforts to slow the economy to bring down inflation have yet to be fully felt.
“The Fed did not welcome the disinflation trends that have just started to emerge and focused on robust job gains and elevated inflation. In a commentary, Edward Moya of Oanda said that any hopes for a soft landing have vanished because the Fed appears to be committed to raising rates.
The S&P 500 lost 0.6% to 3,995.32, giving up an earlier gain of 0.9%. The Dow Jones Industrial Average lost 0.4% at 33,966.35, while the Nasdaq Composite saw 0.8% decline, closing at 11,170.89.
Roughly 70% of the stocks in the S&P 500 closed lower Wednesday, with technology companies, banks and retailers among the biggest weights on the benchmark index. Apple lost 1.6%, Goldman Sachs fell 2.3%, and Best Buy dropped 3.9%.
The stocks of small businesses also fell. The Russell 2000 index fell 0.7% to 1,820.45.
The Fed’s latest increase is smaller than its previous four 0.75 percent increases. This comes after an encouraging report indicated that the Fed was on track to raise interest rates. inflation in the U.S. November saw a 5.1% slowdown, bringing the total to 7.1%.
Powell said the Fed plans to hold rates at a level high enough to slow the economy “for some time” to ensure inflation really is crushed. He said the Fed’s projections released Wednesday do not include any for rate cuts in 2023.
“The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases, but it will take substantially more evidence to give confidence that inflation is on a sustained downward path,” Powell said.
“I wouldn’t see the committee cutting rates until we’re confident that inflation is moving down in a sustained way,” Powell said.
This is the Fed’s latest increase, bringing its federal funds rate to between 4.25% – 4.5%. This is its highest level for 15 years. Fed policymakers predict that the central bank’s interest rate will rise to 5% to 5.25 percent by 2023. This suggests that the Fed will raise rates an additional 0.75 percent next year.
The Fed also indicated it believes its rate will fall by 2024 to 4.1% and then drop to 3.1% in 2025.
Strong consumer spending and strong employment are the main indicators. This has made it harder for the Fed not only to control inflation but also to keep the economy from going into recession.
The U.S. will release their weekly report on unemployment benefits, as well as retail sales data for November, on Thursday.
U.S. benchmark crude gained 60 cents to $76.68 a barrel in electronic trading at the New York Mercantile Exchange. On Wednesday, it gained $1.89 to $77.28 per barrel.
Brent crude oil, which is the international pricing base, fell 46 cents to $82.24 a barrel.
From 135.46 yen, the U.S. dollar rose 135.66 yen to 135.66 yen. From $1.0682, the euro dropped to $1.0657.