Hong Kong stocks hit an 11-year low after historic Fed rate hike

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02:16 - Source: CNN

How the Fed complaint hike could interaction you

Hong Kong CNN Business  — 

Hong Kong stocks deed their lowest level successful much than a decennary Thursday and different Asian markets besides fell aft the US Federal Reserve raised rates by 75 ground points and forecast adjacent much hikes ahead, fueling concerns astir a recession.

The Hang Seng (HSI) Index fell arsenic overmuch arsenic 2.6%, breaking beneath 18,000 points, earlier recovering slightly. By 3.30 a.m ET it was trading down 2% astatine 18,079, its lowest level since December 2011. Australia’s S&P/ASX 200 scale fell 1.6%, portion Japan’s Nikkei 225 (N225) and South Korea’s Kospi some fell 0.6%. China’s Shanghai Composite Index (SHCOMP) slipped 0.3%.

The falls came aft the Federal Reserve connected Wednesday approved a 3rd consecutive 75-basis-point hike successful an assertive determination to tackle white-hot ostentation that has been plaguing the US economy.

The Exchange Square Complex, which houses the Hong Kong Stock Exchange, successful  Hong Kong, China, connected  Wednesday, July 13, 2022.

The supersized hike, which was unfathomable by markets conscionable months ago, takes the US cardinal bank’s benchmark lending complaint to a caller people scope of 3%-3.25%. That’s the highest it has been since the planetary fiscal situation successful 2008.

“If you were to comparison this complaint hike rhythm to erstwhile complaint hike cycles going backmost to 1983, the Fed has ne'er raised rates this overmuch successful this abbreviated a clip period,” said David Chao, planetary marketplace strategist, Asia Pacific (ex-Japan) astatine Invesco.

“It is becoming progressively hard for the US to debar recession fixed the Fed’s ‘forceful and rapid’ complaint hikes,” helium added.

Hong Kong ties the worth of its currency to the US dollar, and successful bid to support that peg the city’s cardinal slope besides raised its basal complaint connected Thursday by 75 ground points.

The Bank of Japan, meanwhile, held short-term involvement rates astatine minus 0.1% connected Thursday, maintaining its argumentation of trying to stimulate the economy. The Japanese yen fell to 145 against the US dollar aft the decision, touching a caller 24-year low.

Investor sentiment successful the portion was wounded by a fig of different factors, including rising US-China tensions implicit Taiwan. US Navy and Canadian warships transited the Taiwan Strait connected Tuesday, conscionable 2 days aft President Joe Biden said US subject unit would support Taiwan if the Chinese subject were to motorboat an penetration of the antiauthoritarian self-ruled island. 

“The geopolitical backdrop, the China slowdown story, the imaginable for vigor rationing successful Europe, the beardown dollar, and fragile-looking home [US] equity and lodging markets constituent to wide recession risks,” said ING analysts successful a enactment connected Thursday.

“A much assertive Federal Reserve complaint hike illustration and tighter monetary conditions volition lone intensify the threat,” they added.

— Emi Jozuka, Junko Ogura, Kathleen Benoza successful Tokyo contributed to this report.

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