Hong Kong stocks lead Asian markets lower with near 2% drop as central bank hikes rattle investors

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Asian shares sank sharply Friday after several central banks around the world cranked interest rates higher in their fight against inflation.

Hong Kong and Tokyo shed nearly 2% and most other regional markets declined. U.S. futures and oil prices also were lower.Hong Kong and Tokyo shed nearly 2% and most other regional markets declined. U.S. futures and oil prices also were lower.

“We think there are signs of inflationary pressure building up on the supply side, but it is certainly not strong enough for the BOJ to bring about immediate tightening,” ING Economics said in a commentary. In Seoul, the Kospi 180721 fell 0.7% to 2,572.33, while Australia’s S&P/ASX 200 XJO gave up 1.4% to 7,090.80. Markets in mainland China were closed for a holiday. Shares also fell in Mumbai and Bangkok.

The Bank of England hiked its main interest rate by a bigger margin than expected to a 15-year high. Central banks in Norway, Switzerland and Turkey also raised borrowing rates. The Fed held interest rates steady at its last meeting after raising rates aggressively throughout 2022 and into 2023 to tame painfully high inflation. Inflation has cooled somewhat since last summer, but the Fed has signaled it may raise rates two more times this year as it tries to push inflation down to its stated goal of 2%.

High interest rates have already slowed manufacturing and other parts of the U.S. economy. They’ve also helped cause three high-profile failures in the U.S. banking system. The banking industry remains under pressure, even after the federal government acted quickly to provide support.

 

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