Asian stocks tumbled on Tuesday and the yen surged against the dollar after the Bank of Japan said it would review its yield curve control policy and widened its target band for interest rates – a move that analysts said would allow long-term interest rates to rise more.
Hawkish comments on interest rates from former Federal Reserve official William Dudley also fueled worries about a worldwide recession.
China’s Shanghai Composite Index fell 1.1 percent to 3,073.77 as the country’s central bank kept its loan prime rates unchanged for the fourth consecutive month.
Hong Kong’s Hang Seng Index slumped 1.3 percent to 19,094.80 as China struggles with record-high daily increases in Covid-19 cases, creating uncertainty over an economic reopening.
Japanese shares led regional losses after the hawkish BoJ policy tweak. The yen surged across the board, rising to a four-month high against the dollar after the central bank expanded its 10-year Japanese government bond yield target band – raising fears of an eventual tightening in policy.
The Nikkei 225 Index plummeted 2.5 percent to 26,568.03, marking its lowest close since October 13 in its sharpest daily decline since October 11. The broader Topix closed 1.5 percent lower at 1,905.59.
Tech stocks suffered heavy losses, with Advantest, Tokyo Electron and SoftBank Group falling 3-5 percent.
Banks Mitsubishi UFJ Financial and Sumitomo Mitsui Financial surged 5-6 percent as the latest BoJ decision signaled the beginning of the slow unwind of ultra-low interest rates in the country.
Seoul stocks fell notably, with the Kospi ending 0.8 percent lower at 2,333.29 – extending losses for a fourth straight session on fears of a global recession.
Australian markets slumped, led by losses in resources and technology stocks. The benchmark S&P/ASX 200 Index dropped 1.5 percent to 7,024.30, while the broader All Ordinaries Index ended 1.7 percent lower at 7,199.60.
Domain Holdings Australia plunged 9.1 percent after the digital property portal updated the market that conditions in the real estate market have deteriorated since its annual general meeting.
Across the Tasman, New Zealand’s benchmark S&P/NZX-50 index slumped 1.0 percent to settle at 11,404.83.
U.S. stocks fell for a fourth straight session on Monday as bond yields climbed amid bets the Federal Reserve will continue with its rate hikes.
In economic news, a measure of homebuilder confidence declined for the twelfth straight month.
The Dow dropped half a percent, the S&P 500 shed 0.9 percent to close at its lowest level in more than a month and the tech-heavy Nasdaq Composite fell 1.5 percent.
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