Asian, European markets drop as Fed worries offset China Covid easing

Most Asian and European markets fell Tuesday and the dollar rose as fresh fears that the US Federal Reserve will push interest rates higher than hoped overshadowed growing optimism over China’s economic reopening, AFP reported.
After a strong start to the week in Asia, traders tracked a big drop on Wall Street that came on the back of data showing a forecast-busting jump in activity in the US services sector last month.
The news — combined with Friday’s bigger-than-expected print on November jobs and wage increases — dented optimism that the Fed’s monetary tightening campaign was finally paying off, which would give it room to take a less hawkish approach into the new year.
Markets had been running higher ahead of the jobs figures after a surprise drop in inflation and comments from Fed boss Jerome Powell that the bank would likely raise rates at a slower pace.
Bets have increased on borrowing costs going higher than five percent next year — from the current 3.75 to 4.0 percent — before the bank pauses, with no cuts seen until 2024.
All three main indexes on Wall Street lost more than one percent and Asia struggled to maintain its recent momentum.
Hong Kong dropped after soaring around 15 percent over the past week on China’s easing of strict Covid containment measures.
Sydney, Seoul, Singapore, Wellington, Mumbai, Bangkok, Taipei and Jakarta were also in the red.
Shanghai was barely moved while Tokyo rose. Manila was up more than three percent as banks were boosted by a forecast-beating jump in inflation that ramped up expectations for a hike in interest rates.
London, Paris and Frankfurt all slipped at the open.