Most Asian markets drop after recession warning, rate hike seen

April 13, 2023 (MLN): Asian markets fell on Thursday as investors reacted to the Federal Reserve's latest policy meeting minutes, which suggested that officials saw a US recession at the end of the year, as APP reported. 

This news was compounded by inflation data that failed to temper expectations of another interest rate hike. Although there was a smaller-than-forecast rise in prices last month, analysts cautioned that there was still a long way to go. While the March consumer price index rose by five percent, it was the lowest since May 2021.

However, core inflation, which excludes food and energy prices, accelerated to 5.6% from 5.5% the previous month. These developments came after Friday's jobs report, which showed another healthy increase in recruitment and reinforced expectations that the Fed will hike rates in May, marking the tenth time in just over a year.

Investors also awaited the release of wholesale inflation data later in the day and were focused on first-quarter earnings reports from top banks, including JPMorgan and Citibank, which were due on Friday.

After the release of the Fed minutes, which highlighted concerns about the impact of last month's banking crisis, Wall Street swung before turning negative towards the end of the day. The minutes indicated that officials believed that recent developments in the banking sector were likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation.

Despite the initial stock market rally, investors remained cautious due to persistently high inflation and ongoing rate-cut bets.

In early Asian trade, Hong Kong was dragged by sharp losses in the tech sector after the Financial Times reported that Japan's SoftBank was looking to unload a majority of its holdings in Alibaba. The e-commerce giant fell more than five percent at one point, while rival JD.com was off around four percent. There were also losses in Sydney, Singapore, Wellington, Taipei, Manila, and Jakarta, though Tokyo, Shanghai, and Seoul ticked slightly higher.

Oil prices inched lower but held most of Wednesday's two-percent rally fueled by a drop in US inventories and supply issues from Iraqi Kurdistan. The two main contracts are now sitting around levels not seen since November, while traders are awaiting an outlook update from OPEC later in the day.

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