Asian stocks fall amid Wall Street sell-off

December 19, 2024 (MLN): Asian markets sank Thursday and the dollar held gains following a severe sell-off on Wall Street that came after the Federal Reserve halved its rates outlook and boss Jerome Powell warned officials' focus was back on fighting inflation.

With Tokyo's Nikkei 225 down 1.0% at 38,708.38, Hong Kong's Hang Seng Index losing 1.1% at 19,655.82, and Shanghai's Composite down 0.7% at 3,358.86, as APP reported.

Attention now turns to the Bank of Japan as it holds its policy meeting, with speculation swirling around whether it will hike borrowing costs for a third time this year.

The Euro/dollar was up at $1.0378 from $1.0365, the Pound/dollar rose slightly to $1.2587 from $1.2581, and the Dollar/yen increased to 154.79 yen from 154.73 yen.

Meanwhile, the Euro/pound moved up to 82.45 pence from 82.38 pence.

All this followed a dramatic sell-off on Wall Street after the Fed's closely watched "dot plot" indicated that it would cut rates just twice next year, as opposed to the four cuts previously forecast.

Some suggested the retreat was also fueled by President-elect Donald Trump's opposition to a spending package aimed at averting a fast-approaching US government shutdown.

While the rate cut had been widely expected, Powell's comments emphasized that the battle against inflation was paramount, as inflation remains stubbornly above the Fed's 2 % target.

"We need to see progress on inflation," he stated during a news conference, adding that the central bank had moved quickly to reach its current position, but would now be moving slower going forward.

Despite the reduction in rates, the S&P 500 lost 3 % and the tech-heavy Nasdaq dropped even more, highlighting the impact of the Fed's shift toward a slower rate-cut pace.

The Fed's decision lifted its economic growth outlook, but the prospect of rates remaining higher for longer sent markets reeling. In contrast, the New York Dow Jones Industrial Average closed down 2.6% at 42,326.87.

Commodities also saw declines, with West Texas Intermediate crude down 0.5 % at $70.22 per barrel, and Brent North Sea Crude falling 0.6% at $72.99 per barrel.

In contrast to the global sell-off, London's FTSE 100 managed a modest gain of 0.1% at 8,199.11.

As the Bank of Japan convenes, expectations are that it will hold off on further rate hikes, waiting until its January meeting.

However, there are hints that a shift could still be in the cards, as the bank faces pressure to support the yen, which is pushing back toward 155 per dollar.

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