Asian markets react to US Fed remarks

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SINGAPORE — Asia-Pacific markets fell on Thursday as investors digest an overnight update from the U.S. Federal Reserve indicating the central bank plans to raise interest rates as early as March.

Hong Kong’s Hang Seng Index fell 2% while the technology-focused Hang Seng Tech Index fell 2.91%. Hong Kong-listed shares of major Chinese tech names fell sharply: Alibaba shares fell 5.13%, JD 3.93%, Meituan 4.8%, Baidu 2.96% and Tencent of 2.07%.

Elsewhere, continental markets were more subdued. The Shanghai Composite rose slightly, but the Shenzhen Component slipped 0.24%

In Japan, the Nikkei 225 slipped 1.67% while the Topix was down 1.23%.

Samsung Electronics reported a 53% increase in operating profit in the fourth quarter of 2021 from a year earlier, but it was down 12% from the previous three months.

The global chipmaker said its lucrative memory business expects server demand to rise in 2022 as companies ramp up investment in information technology, but supply chain issues should persist.

Samsung shares fell 1.55%

Australian stocks retraced earlier gains as the ASX 200 fell 1.77%.

Thursday’s session in Asia Pacific followed overnight declines on Wall Street where the Dow Jones Industrial Average ended the day down 129 points, having gained more than 500 points at one point following the Fed update.

Oil prices rose 2% overnight, with international Brent futures hitting $90 on Wednesday for the first time since 2014.

The Taiwan market is closed for a public holiday on Thursday.

Fed meeting, US markets

The Federal Open Market Committee said a quarter-percentage-point hike in its benchmark short-term borrowing rate is likely — it would be the Fed’s first hike since December 2018.

Fed Chairman Jerome Powell told a news conference that the US central bank has “some leeway to raise interest rates without threatening the labor market.” Inflation in the United States is at its highest level in nearly 40 years.

While the Fed’s post-meeting statement did not provide a specific timing for when the hike would occur, indications suggest it could happen as early as its March meeting.

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“The Fed also used this meeting to continue discussions on balance sheet normalization and issued a set of principles on its approach to balance sheet reduction. Most important was the desire to make it predictable yet sensitive to both the economy and markets,” the ANZ analysts said.

Averages for major U.S. stock markets reversed gains after Powell’s comments.

The Dow Jones Industrial Average closed down 0.4% on Wednesday at 34,168.09. It was up more than 500 points before the Fed update. The S&P 500 slid 0.2% to 4,349.93, while the Nasdaq Composite ended the session near 13,542.12, buoyed by Microsoft’s post-earnings gain.

Oil prices fall

Oil prices fell Thursday during Asian trading hours: U.S. crude futures were down 0.29% while the global benchmark Brent was down 0.4%.

In overnight trade, prices rose more than 2% amid growing tensions between Russia and Ukraine, where experts say fears of a Moscow invasion of the European country of the East persist. Brent prices hit $90 at one point, but pulled back slightly.

Elsewhere, the South Korean military said North Korea fired what appears to be two ballistic missiles on Thursday, Reuters reported. The reclusive state conducted six missile tests this month.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, last traded at 96.563, down from 95.948.

In other currencies, the Japanese yen traded at 114.59 to the dollar, while the Australian dollar was at $0.7082.

– CNBC’s Saheli Roy Choudhury, Jeff Cox, Hannah Miao and Fred Imbert contributed to this report.

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