Asia Stocks Fall After Fed Says More US Rate Hikes Likely

Asian stock markets tumbled on Thursday after the Federal Reserve added to recession fears by saying it wasn't finished raising US interest rates to cool inflation.

Hong Kong's benchmark lost 3.1 per cent. Shanghai, Seoul and Sydney also followed Wall Street lower after the Fed on Wednesday raised its key rate to the highest level in 15 years.

Oil prices declined while the euro stayed below 99 cents.

Wall Street's benchmark S&P 500 index plunged 2.5 per cent after the Fed raised its short-term lending rate by 0.75 percentage points, three times its usual margin, for a fourth time this year.

Fed Chair Jerome Powell reinforced expectations of more rate hikes, saying “we have a ways to go.” He said it would be “very premature” to consider pausing.

“Recession risks are rising, but that is the price the Fed is prepared to pay to get inflation under control,” said James Knightley, Padhraic Garvey and Chris Turner of ING in a report.

The Hang Seng in Hong Kong shed 488 points to 15,338.85 and Sydney's S&P-ASX 200 fell 1.9 per cent to 6,855.40.

The Shanghai Composite Index slipped 0.2 per cent to 2,997.46. Japanese markets were closed for a holiday.

The Kospi in Seoul declined 0.6 per cent to 2,322.11. New Zealand and Southeast Asian markets also fell.

The Fed and central banks in Europe and Asia have raised rates aggressively this year to stop inflation that is running at multi-decade highs. Investors worry that might tip the global economy into recession.

Consumer prices in the United States rose 6.2 per cent over a year earlier in September, the same as the previous month. But core inflation, which excludes volatile food and energy prices to give a clearer picture of the trend, accelerated to 5.1 per cent from August's 4.9 per cent.

The Fed said on Wednesday it could shift to a more deliberate pace of rate hikes and would consider the overall economic impact.

On Wall Street, the S&P 500 fell to 3,759.69. The Dow Jones Industrial Average lost 1.5 per cent to 32,147.76. The Nasdaq composite slid 3.4 per cent to 10,524.80.

Tech stocks, retailers and health care companies were among the biggest declines.

Apple, Inc. fell 3.7 per cent, Amazon.com, Inc. dropped 4.8 per cent and Johnson &Johnson, Inc. slipped 1.5 per cent.

The yield on the two-year Treasury, an indicator of market expectations of Fed action, rose to 4.58 per cent from 4.55 per cent before the Fed statement. The yield on the 10-year Treasury, used to set mortgage rates, climbed to 4.10 per cent from 3.98 per cent.

Investors hope signs housing sales and other activity are weakening might encourage Fed officials to ease rate hike plans. But the latest data, especially on hiring, are relatively strong, a sign the Fed might stay aggressive.

Data from payroll processor ADP showed companies added jobs at a faster pace in October than expected.

The government is due to release unemployment data on Thursday and a report on the broader jobs market on Friday.

In energy markets, benchmark US crude lost 43 cents to USD 89.57 in electronic trading on the New York Mercantile Exchange. The contract rose USD 1.63 to USD 90 on Wednesday.

Brent crude, the price basis for international oil trading, shed 27 cents to USD 95.89 per barrel in London. It rose USD 1.51 the previous session to USD 96.16 a barrel.

The dollar gained to 147.33 yen from Wednesday's 146.94 yen. The euro declined to 98.26 cents from 98.83 cents. 

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