Asian markets mostly drop as traders eye more monetary tightening

Most Asian markets resumed their downward trend Wednesday, with traders fearing the Federal Reserve’s determination to beat inflation with higher interest rates will tip the world’s top economy into recession.

After bouncing from their June lows, global equities are once again taking a hiding from worried investors after Fed chief Jerome Powell warned last week the bank would need to tighten policy much more to succeed in its battle against prices.

Wall Street’s three main indexes fell for a third straight day Tuesday to sit at a one-month low, with healthy data on US consumer sentiment and job openings indicating the economy remained resilient despite recent rate hikes and four-decade-high inflation.

But analysts said the readings were a case of good news being bad news as they would allow the Fed to stick to its plan of lifting borrowing costs further. Expectations are growing for a third successive three-quarter-point increase next month. Traders are now awaiting the release of US job-creation figures on Friday for a better idea about the state of the economy.

However, commentators said trying to plot a course through the next few months would be tricky owing to inflation and rate increases as well as other issues such as the Ukraine war, geopolitical tensions and China’s Covid-damaged economy.

“What’s clear is that predicting this market is not clean cut,” Angeline Newman, of UBS Global Wealth Management, told Bloomberg Television.

“We are living in a world where conflicting economic signals are making the path of monetary policy very difficult to determine.” Shanghai dropped after a report on Chinese factory activity showed another contraction, as the sector was buffeted by lockdowns due to Beijing’s zero-Covid strategy and high temperatures that led to energy rationing.