By Associated Press
TOKYO — Asian shares fell Friday, tracking losses on Wall Street after Federal Reserve Chair Jerome Powell indicated increases in interest rates must be faster to fight inflation.
Major indexes cascaded downward in Asia, with the drop pronounced at nearly 2% in Tokyo. Japan’s consumer price index data showed an increase for the seventh consecutive month, although the results were within market expectations.
Japan’s benchmark Nikkei 225 /zigman2/quotes/210597971/delayed JP:NIK +1.30% dipped 1.9%. Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.04% dropped 1.5% while South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.73% shed 1%. Hong Kong’s Hang Seng /zigman2/quotes/210598030/delayed HK:HSI -0.13% slipped 0.9%, while the Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP +0.53% was flat. Benchmark indexes in Singapore /zigman2/quotes/210597985/delayed SG:STI +0.80% , Taiwan /zigman2/quotes/210597977/delayed TW:Y9999 -0.88% and Indonesia /zigman2/quotes/210597981/delayed ID:JAKIDX -2.28% declined.
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 /zigman2/quotes/210561789/realtime/sampled USDJPY +0.1592% rose to 128.57 Japanese yen early Friday from 128.36 yen.
An intervention, particularly from the U.S., may be coming, said Stephen Innes at 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 said, referring to Japan’s central bank.
But the main cause of the dollar’s surge against the yen and other currencies, a growing gap between interest rates in Japan and some other Asian countries and rising U.S. interest rates, is unlikely to abate.
In a panel discussion held by the International Monetary Fund, Fed Chair Jerome Powell said the Fed must move faster than it has previously to tackle high inflation, which suggests sharp interest rate increases are likely in coming months.
Powell’s remarks helped send stocks lower on Wall Street. The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.06% closed 1.5% lower at 4,393.66 after having been up 1.2% in the early going. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.05% fell 1% to 34,792.76 and the Nasdaq /zigman2/quotes/210598365/realtime COMP +0.90% slid 2.1% to 13,174.65.
“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.
The Fed has already announced a quarter-percentage point rate hike and Wall Street expects a half-percentage rate hike at its next meeting in two weeks. Other central banks have also moved to raise interest rates to try and temper the impact of rising prices on businesses and consumers.
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.
That suggests a half-point rate increase could be on the table when Fed officials hold their next interest rate and economic policy meetings May 3-4, Powell said. In the past, the Fed has typically raised its benchmark short-term rate by more modest quarter-point increments.
Bond yields have been gaining ground as investors prepare for higher interest rates. The yield on the 10-year Treasury rose significantly to 2.97% Friday from 2.92% late Thursday. hovering near its highest levels since late 2018.
Benchmark U.S. crude fell 65 cents to $103.14 a barrel. It rose 1.6% on Thursday and is up roughly 40% for the year. That has made gasoline more expensive, which cuts deeper into consumers’ wallets. Brent crude , the international standard, lost 64 cents to $107.69 a barrel.