Asian markets struggle with inflation, rates back in focus

Markets struggled in Asia on Wednesday following a tepid lead from Wall Street, with inflation and expected interest rate hikes returning to the key focus of concerns as Omicron fears fade for now.

While the new Covid variant continues to spread rapidly around the world, forcing governments to maintain containment measures, its apparently milder symptoms have allowed traders to focus more on future economic policies and plans to rein in surging prices.

Later Wednesday sees the release of minutes from the Federal Reserve's December rate meeting, which dealers hope will provide a clearer idea about officials' policy plans.

That is followed by Friday's jobs data for last month that could play a key role in their next deliberations.

With the bank due to end its vast bond-buying stimulus programme by March, commentators are debating when and how many times the Fed will hike borrowing costs as it tries to overcome inflation running at a pace not seen in decades.

"One of the more dovish Fed members, Neil Kashkari, said he supports two rate increases this year, which might mean pricing in three rate hikes this year might not be enough," said OANDA's Edward Moya.

And Steve Englander, at Standard Chartered, added: "Earlier we thought that rate hikes wouldn't be on the table until mid-2022 but the Fed seems to have worked up a consensus to taper faster and hike sooner rather than later."

Still, he remained upbeat about the outlook for markets, saying: "But we don't think inflation dynamics will support continued hiking.

"We suspect the biggest driver of asset markets will be when inflation and Covid fears begin to ebb."

After ringing up new record highs on Monday, the S&P 500 fell on Wall Street, while the Nasdaq sank more than one per cent as tech firms -- which generally rely on debt and low rates to fuel growth -- took a hit.

However, the Dow edged to a new all-time high.

Chinese technology firms, which have also been hit by a crackdown from the government, were a big drag on Hong Kong as it sank more than one percent while Shanghai, Sydney and Seoul also fell.

Wellington, Taipei and Jakarta rose along with Manila where trading resumed after being cancelled Tuesday owing to a technical glitch. Tokyo was flat with the yen holding losses at a four-year low against the dollar.

In company news, China Mobile soared more than nine percent on its debut in Shanghai after the telecoms giant was delisted in New York under a stand-off between Beijing and Washington.

The share offer is expected to raise $8.8 billion after the company exercises an over-allotment option, according to Bloomberg News, making it the largest on China's domestic stock markets for more than a decade.

Tokyo - Nikkei 225: FLAT at 29,313.22 (break)

Hong Kong - Hang Seng Index: DOWN 1.2 per cent at 23,016.90

Shanghai - Composite: DOWN 0.8 per cent at 3,603.19

Dollar/yen: DOWN at 116.00 yen from 116.12 yen late Tuesday

Pound/dollar: UP at $1.3533 from $1.3529

Euro/dollar: UP at $1.1291 from $1.1289

Euro/pound: UP at 83.43 pence from 83.40 pence

West Texas Intermediate: DOWN 0.2 per cent at $76.81 per barrel

Brent North Sea crude: DOWN 0.2 per cent at $79.83 per barrel

New York - DOW: UP 0.6 per cent at 36,799.65 (close)

London - FTSE 100: UP 1.6 per cent at 7,505.15 (close)

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