Asian stocks fall resumes as Fed's hawkish speech strengthens US Dollar's high position

Asian stocks fall resumes as Fed's hawkish speech strengthens US Dollar's high position

The fall in Asian stock markets resumed on Wednesday, as hawkish comments from Federal Reserve officials undermined risk appetite.

The MSCI Asia Pacific index fell as much as 2% after a slight gain on Tuesday, with stock indexes in Korea, Hong Kong and Taiwan falling further. U.S. stock futures also fell as the dollar and Treasury yields rose after St. Louis Fed Governor James Bullard, led by officials, stressed the need for further interest rate hikes to combat inflation.

Apple Inc.'s Asian suppliers fell after people familiar with the matter told Bloomberg News that the company is abandoning plans to increase production of its new iPhones this year after an expected surge in demand failed to materialize. Technology and consumer discretionary sectors performed the worst on the Asian stock market.

"The dollar is hitting new highs due to the Fed's continued hawkish stance, which is affecting all regional stocks," said Marvin Chen, analyst at Bloomberg Intelligence. In addition, "unsatisfactory demand for the Iphone may affect the entire supply chain and most of all affect the technology industries of Taiwan and Korea," he added.

Lowered by almost 12% in September, the MSCI Asia index is approaching its worst month since March 2020. This fact reduced its losses from the record high reached in February last year to more than 35%, which makes it occur the worst drawdown in about a decade.

“The dollar, which has reached new highs against the backdrop of the Fed's continued hawkish stance, has an impact on all regional stocks,” said Marvin Chen, analyst at Bloomberg Intelligence. Separately, “disappointing iphone demand could affect the entire supply chain and affect high-tech Taiwan and Korea the most,” he added.

While rising inflation, interest rates and the war in Ukraine have put pressure on stocks around the world, Asia has fared worse this year than the US and Europe, due to slowing growth and an ongoing stock sell-off in China, the region's largest economy.

As for other key events, the stocks exposed in Europe also fell. This followed the collapse of British gilts overnight and after the International Monetary Fund issued a sharp criticism of the new unfunded tax cuts in the UK, calling them excessive and in need of revision.

South Korea's Kospi cut some of its losses after the country said it was taking steps to strengthen its government bond and equity markets, which are selling off amid concerns about an approaching global recession.