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Asian stocks follow Wall Street lower amid concern of a Fed turning more hawkish

BEIJING (AP) — Asian stock markets followed Wall Street lower Thursday after the Federal Reserve indicated it might ease off economic stimulus earlier than previously thought.

Tokyo, Hong Kong and Seoul fell while Shanghai gained after the U.S. monetary-policy makers, who previously forecast no interest rate hikes before 2024, estimated their benchmark rate would be raised twice by late 2023. The Fed also indicated it sees the U.S. economy improving faster than expected.

Market Snapshot: Dow losing streak extended as Fed’s Powell delivers slightly ‘hawkish’ update on monetary policy

On Wall Street, the benchmark S&P 500 index
SPX,
-0.54%

fell 0.5% on Wednesday after Fed projections showed some of its board members expect short-term interest rates to rise by half a percentage point by late 2023. Ultralow rates from the Fed and other central banks have propelled a global stock-market rebound from last year’s plunge amid the coronavirus pandemic’s early days.

“The Fed may have delivered a more hawkish message for markets than many would have expected,” Yeap Jun Rong of IG said in a report. Still, Yeap said, differing views among board members suggests “much will still depend on how the economic recovery will play out.”

The Nikkei 225
NIK,
-1.11%

in Tokyo lost 1.1% to 28,965.07 and Hong Kong’s Hang Seng
HSI,
+0.28%

was off less than 0.1% at 28,434.62. The Shanghai Composite Index
SHCOMP,
+0.17%

was up 0.2% at midmorning at 3,525.67.

The Kospi
180721,
-0.38%

in Seoul sank 0.5% to 3,261.05 and Australia’s S&P-ASX 200
ASX10000,
-3.69%

shed 0.4% to 7,357.90. New Zealand, Singapore and Jakarta declined, while Bangkok advanced.

The Fed’s announcement Wednesday reflected growing confidence in the U.S. economy as more people are vaccinated against the coronavirus and business activity revives.

Investors have been worried the Fed and other central banks might feel pressure to withdraw stimulus to cool rising inflation. Fed officials have said they believe that inflation will be short-lived, a stance they repeated Wednesday.

Fed Chairman Jerome Powell said any changes are some way off but conditions have improved enough to start discussing when to slow bond purchases. The Fed is buying $120 billion a month to inject money into financial markets and keep longer-term interest rates low.

On Wall Street, the S&P 500 fell to 4,223.70, while the Dow Jones Industrial Average
DJIA,
-0.77%

lost 0.8% to 34,033.67. The Nasdaq Composite
COMP,
-0.24%

shed 0.2%, to 14,039.68.

In the bond market, the yield on the 10-year Treasury
TY00,
-0.09%

climbed to 1.55% from 1.50% late Tuesday. The 2-year yield
TU00,
-0.00%
,
which moves more closely with expectations for Fed policy, rose to 0.20% from 0.16%.

In energy markets, benchmark U.S. crude
CL00,
-0.57%

lost 64 cents to $71.51 in electronic trading on the New York Mercantile Exchange. The contract rose 3 cents on Wednesday to $72.15. Brent crude
BRN00,
-0.60%
,
the price basis for international oils, shed 70 cents to $73.69 per barrel in London. It gained 40 cents the previous session to $74.39.

The dollar gained to 110.66 Japanese yen
JPYUSD,
0.02

from Wednesday’s 110.50 yen. The euro
EURUSD,
-0.03%

fell to $1.2000 from $1.2016.

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