Asian equities retreated on Thursday following a warning from the U.S. Federal Reserve about the potential for cautious action regarding further interest rate reductions due to inflationary apprehensions.
Consequently, U.S. Treasury yields surged and the dollar ascended to its highest point in over two years as the Federal Reserve's hawkish stance prompted concerns over increasingly restrictive monetary conditions. Prominent analysts have cautioned that the policy proposals by U.S. President-elect Donald Trump, particularly regarding tax reductions and extensive import tariffs, may exert upward pressure on prices, potentially sustaining elevated interest rates for a more extended period.
In Asian markets, gold recovered from its one-month low during trading, while oil prices declined amid worries about demand. The Shanghai Composite Index in China fell by 0.36% to 3,370.03, influenced by trade tensions, including a potential U.S. ban on TP-Link routers due to cybersecurity issues. Additionally, China introduced new regulations to enhance oversight of foreign accounting firms operating domestically, aiming to curb accounting malpractice and fraud.
Meanwhile, Hong Kong's Hang Seng Index managed to bounce back from early losses, closing 0.56% higher at 19,752.51. In Japan, markets ended mildly below the day's lows, with the yen weakening and government bond movement remaining subdued following the Bank of Japan's decision to maintain current interest rates. The Nikkei concluded 0.69% lower at 38,813.58, while the broader Topix Index decreased by 0.22% to $2,713.83.
Losses were pronounced in chip-related stocks, with Advantest and Tokyo Electron declining by 0.8% and 1.4%, respectively. SoftBank Group, with its focus on artificial intelligence startups, saw a 4.3% drop after U.S.-based Micron Technology provided weaker-than-expected guidance for the current quarter. Conversely, financial institutions such as Mitsubishi UFJ Financial, Mizuho Financial, and Sumitomo Mitsui Financial posted gains of between 1% and 2%.
The South Korean market saw significant declines, as the Kospi Index plunged 1.95% to 2,435.93, led by losses in major tech firms like Samsung Electronics and SK Hynix, which fell 3.3% and 4.6%, respectively.
Australian markets also faced steep declines, particularly in banking and commodity sectors. The S&P/ASX 200 fell 1.70% to 8,168.20, while the All Ordinaries Index closed down 1.68% at 8,415. Woodside Energy saw a 1.9% decline following a stake exchange agreement with Chevron in several energy ventures.
In New Zealand, the S&P/NZX 50 dipped 0.87% to 12,754.15 after data indicated the country entered a recession in the third quarter.
Meanwhile, U.S. stocks were under significant selling pressure overnight, reacting to the Federal Reserve's 25-basis point rate cut—as anticipated—yet adjusting its forecasts to suggest just two rate cuts next year, down from four, attributing this revision to persistently high inflation. The Dow Jones Industrial Average sunk 2.6%, marking its tenth consecutive session of losses and reaching its lowest close in over a month. The S&P 500 and the tech-focused Nasdaq Composite also dropped sharply, by 3% and 3.6%, respectively, each hitting one-month closing lows.
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