Asian stocks fall after Fed hints more rate hikes

Asian stocks dropped after Federal Reserve Chairman Jerome Powell failed to quell investor concerns that tightening policy will choke economic growth. Treasuries pared back some of Wednesday’s gains and U.S. stock futures ticked higher.

Equities fell from Tokyo to Hong Kong. Gains in U.S. stock futures come off the back of a tumultuous session for the S&P 500 Index, which turned an advance of as much as 1.5 percent into a loss of the same magnitude to end Wednesday’s session at a 15-month low. Policymakers cut forecasts for interest-rate hikes next year to two from three, though markets had been priced for just one. Powell said the Fed’s balance sheet normalization would continue “on automatic pilot.”

Investors had hoped for a less aggressive approach after U.S. stocks tumbled into a correction amid concern that global growth is slowing. The Fed ignored repeated calls from U.S. President Donald Trump in the lead up to the decision to refrain from lifting borrowing costs again amid the volatility in financial markets.

“The Fed’s been a huge friend of the stock market and they are now a little bit of an enemy and probably become worse of an enemy before this is all over,” Bob Doll, Nuveen chief equity strategist and senior portfolio manager, said on Bloomberg Television.

Beyond the Fed, trade and politics remain dominant themes. The U.S. Senate will vote as soon as Wednesday on a bipartisan spending bill to avoid a partial federal shutdown and keep the government funded until Feb. 8. Meanwhile, Treasury Secretary Steven Mnuchin said America and China are planning to hold meetings in January to negotiate a broader trade truce. In Asia, focus turns to the Bank of Japan monetary policy decision.

Elsewhere, Italian debt surged after the European Commission decided against launching a disciplinary procedure over the country’s budget. Oil shed almost half the day’s gains.

The MSCI Asia Pacific Index lost 0.6 percent as of 9:35 a.m. in Hong Kong. Japan’s Topix index fell 0.6 percent. Shanghai Composite added 0.1 percent. Hang Seng index slid 0.1 percent. South Korea’s Kospi index dropped 0.4 percent. S&P 500 futures rose 0.4 percent. The S&P 500 fell 1.5 percent at the close in New York.

The yen was little changed at 112.54 per dollar. The offshore yuan traded at 6.9064 per dollar. The Bloomberg Dollar Spot Index nudged 0.1 percent lower. The euro was flat at $1.1378. The British pound rose 0.1 percent to $1.2617.

The yield on 10-year Treasuries rose about three basis points to 2.78 percent, unwinding some of its six-point slide following the Fed’s decision.

West Texas Intermediate crude slid 1.5 percent to $47.44 a barrel, trimming a 3.4 percent rally Wednesday. Gold was steady at $1,244.73 an ounce.

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