Markets follow Wall Street decline on inflation concerns, dollar rallies

RECORD PLUNGE FOR RUPEE

Wall Street’s three major indices collapsed, with the Nasdaq taking the hardest hit as tech companies – prone to higher yields – were battered, while European markets were also hammered.

Asia followed, with more than three percent declines in Hong Kong, Tokyo and Seoul, while Mumbai, Jakarta, Taipei, Jakarta and Wellington fell more than two percent. Shanghai, Singapore, Manila and Bangkok also fell sharply.

Goldman Sachs analysts said in a note: “At some point, financial conditions will tighten enough and/or growth weaken enough for the Fed to stop walking.

“But we seem a long way from that point, pointing to upside risks to bond yields, continued pressure on risky assets and likely broad strength in the US dollar for now.”

The dollar continued to push expectations for a sharp rise in US interest rates higher, reaching a 24-year high of 135.19 yen, while also breaking above 78 Indian rupees for the first time.

The dollar was also at multi-year highs for the euro and sterling.

“The ongoing backdrop to the yen’s fall is the widening gap between long-term interest rates in Japan and the United States,” Takahide Kinouchi, executive economist at the Nomura Research Institute, said in a recent commentary.

And as higher oil prices are fueling US inflation, “expectations are growing that aggressive monetary tightening in the US will continue for some time to come, pushing US interest rates further.”

Oil prices fell, extending Friday’s pullout on demand concerns as China sticks to an economically damaging zero-COVID policy to fight another outbreak of the disease.

Parts of Shanghai were closed again and officials conducted massive tests on millions of people just weeks after strict measures were lifted in the country’s largest city.