By Ambar Warrick
Investing.com– Asian stock markets slumped on Wednesday as hawkish comments from Federal Reserve officials brewed more concerns over heightened interest rates, pushing investors out of risk-driven assets and into the dollar.
Technology-heavy indexes were the worst performers in the region. South Korea’s slumped nearly 3% to a two-year low, while Hong Kong’s index dropped 2.4% to an 11-year low. Their losses mirrored a similar trend on Wall Street, as investors discounted future earnings from the sector against rising yields.
Japan’s index fell 2%, while lost 2.2%.
Sentiment towards risk-driven markets was battered by hawkish comments from Fed officials James Bullard and Neel Kashkari, who warned that the U.S. faced a serious recession risk, and that more interest rate hikes were likely in order.
San Francisco Fed President Mary Daly also said that the bank was struggling to maintain a balance between slowing inflation and avoiding a recession.
Their comments boosted the to a new 20-year peak, while pushing U.S. close to the key 4% level. This, coupled with a slew of weak data prints from major economies, drove steep losses across most asset classes.
The hawkish comments come just a few days after the and warned that it was willing to risk economic pain in its battle against inflation. Rising interest rates have been the biggest weight on stock markets this year.
Asian stocks also took a weak lead-in from Wall Street on Wednesday, as . Wall Street is now close to losing all of its gains made in the past two years, following a sharp reversal in accommodative monetary policy by the Fed.
China’s blue-chip index fell 1.3% on Wednesday, with sentiment towards the country worsening as the hit a record low.
Chinese stocks are trading close to five-month lows, but have fared somewhat better than their Asian peers this year on stimulus measures by the government.
But a weakening and a potential resurgence in COVID-19 cases are expected to weigh heavily on the economy this year.