Daily Times

Asian markets mostly fell Thursday after the Federal Reserve hiked interest rates and signalled a more hawkish tone for future moves, while US President Donald Trump stoked trade war fears by suggesting he will hit China with fresh tariffs.

After a keenly watched meeting, the US central bank lifted borrowing costs, as expected, but indicated another two this year and four in 2019 as the world’s top economy continues to improve and inflation picks up.

While the Fed had earlier in the year been tipped to announce three increases each year, there had been growing speculation that it would have to be more aggressive to keep a lid on prices and prevent the economy from boiling over.

Policymakers have been forced to change tack to take account of Trump’s huge tax cuts in December, which have already started to take effect.

But in a statement they stressed that rising rates were unlikely to hit the economy, which Fed chief Jerome Powell said was “in great shape”.

James McCann, global economist at Aberdeen Standard Investments, wrote in a commentary: “The (Fed) is now signaling two more hikes this year and has dropped its increasingly stale signal to markets that rates will remain for some time below those levels expected in the long term.

“This shift reflects the robust domestic growth backdrop, which is being fermented by a late-cycle fiscal stimulus.”

All three main indexes on Wall Street ended down on the prospect of higher borrowing costs, which would affect investment, while the dollar was slightly weaker as traders had largely priced in further hikes.

‘A little bit upset’

And Asian markets struggled, with Tokyo ending the morning 0.4 percent lower.

Hong Kong was down 0.3 percent, with banks lower after the city’s de facto central bank lifted its own interest rates to keep in line with the Fed. The HKMA and US central bank’s monetary policies are linked owing to their dollar peg.

Seoul fell 1.2 percent and Singapore was also off 0.2 percent. Shanghai dipped 0.2 percent while Sydney eased 0.1 percent.

Eyes now turn to the end of the European Central Bank’s meeting later in the day, with expectations it will discuss winding in its crisis-era stimulus.

Trade war fears returned to the fore after Trump warned Beijing of possible fresh tariffs.

“China could be a little bit upset about trade because we are very strongly clamping down on trade,” he said in an interview aired on Fox News Wednesday.

Key figures

Tokyo – Nikkei 225: DOWN 0.4 percent at 22,886.15 (break)

Hong Kong – Hang Seng: DOWN 0.2 percent at 30,674.54

Shanghai – Composite: DOWN 0.3 percent at 3,040.6

Euro/dollar: UP at $1.1797 from $1.1786 at 2100 GMT

Pound/dollar: UP at $1.3376 from $1.3367

Dollar/yen: DOWN 110.30 yen from 110.37 yen

Oil – West Texas Intermediate: UP three cents at $66.67 per barrel

Oil – Brent Crude: DOWN 10 cents at $76.64 per barrel

New York – Dow Jones: DOWN 0.5 percent at 25,201.20 (close)

London – FTSE 100: FLAT at 7,703.71 (close).

Published in Daily Times, June 15^th 2018.