Asian traders resume selling as another jumbo Fed hike looms

HONG KONG: Asian markets resumed their downward spiral Wednesday after a brief respite the previous day, as traders prepared for what many expect to be a third successive jumbo interest rate hike by the Federal Reserve.

Equities around the world have been clattered by fears of a recession in major economies as central banks ramp up borrowing costs to combat the highest inflation in decades, which has been compounded by the Ukraine war and supply chain snarls.

Adding to the dour mood, four regions in Russian-held parts of Ukraine said they will hold weekend referendums on annexation by Moscow — a move that risks escalating the conflict as President Vladimir Putin could claim an attack in those regions was an attack on Russia.

But for now all eyes are on Washington, where the Fed is due to conclude its latest policy meeting, with most analysts predicting it will announce another 75 basis-point lift though some have tipped a full percentage-point move.

However, while the hike has largely been priced into the markets, the US central bank’s forecast and post-meeting comments from boss Jerome Powell are the main attraction for investors.

“Volumes remain light and the mood cautious, with few looking to take on large positions before hearing what the Fed says and where policy makers see rates going by the end of the hiking cycle,” Fiona Cincotta, at City Index, said.

“This is what will drive the markets, not the rate hike… but what the Fed plans to do next.”

Fed officials have for months stuck to the mantra that they will only ease up on their hawkish drive when inflation comes down and remains subdued.

This has led many to warn that rates are unlikely to come down anytime soon, possibly as late as 2024, with a recession more than likely in the United States as well as other major economies.