Asia stocks fell for a second day in a row on Friday, and were headed for their worst week in two months, after a slew of central banks raised interests rates and warned there were more hikes to come next year.
Interest rates went up in Europe, Britain, Switzerland, Denmark, Norway, Mexico and Taiwan on Thursday, following a U.S. rate hike on Wednesday and central bankers’ vows to keep on raising rates until inflation is tamed had markets worried about a potential recession.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.65% and was down 2.1% on the week.
Japan’s Nikkei fell 1.5%.
Overnight on Wall Street the S&P 500 had its biggest percentage drop in more than a month and fell 2.5%.
Longer-dated bonds were firm and the U.S. dollar rallied.
“Central banks are still hawkish, still intent on raising rates,” said Alvin Tan, Asia currency strategist at RBC Capital Markets in Singapore.
“So there’s a tension between the central banks being more hawkish than the market has been expecting, and that dichotomy has been emphasised over the past 48 hours by both the Fed and the European Central Bank.”