Asian stocks drop after Powell testimony, India set for correction.
Most Asian stocks fell slightly on Thursday, in line with the decline on Wall Street after Federal Reserve Chair Jerome Powell's remarks indicating the possibility of more interest rate hikes. This development also suggests that Indian markets, which had reached record highs, are poised for a retreat. However, trading volumes were limited in the region due to market holidays in China and Hong Kong, with Chinese markets closed for the entire week.
Powell's testimony before the House Financial Services Committee, where he acknowledged the likelihood of increased rate hikes in response to relatively high inflation, contributed to the decline in Wall Street indexes on Wednesday. Although Powell did not specify whether a rate hike in July was imminent, his comments underscored expectations for more tightening measures. Market participants now eagerly await Powell's testimony before the Senate Banking Committee later in the day, seeking further clarity on monetary policy.
Australia's ASX 200 was the worst-performing index, experiencing a 1.5% loss as investors continued to lock in profits following a seven-day rally. The uncertainty surrounding global commodity demand, triggered by China's somewhat underwhelming interest rate cut during the week, also impacted heavyweight mining stocks. In Southeast Asia, Philippine shares led losses with a 0.5% decline, while South Korea's KOSPI bucked the trend with a 0.5% increase.
Overall, Asian stocks faced downward pressure as Powell's remarks on potential rate hikes resonated in the markets, particularly impacting Indian and Australian markets. Uncertainties regarding global commodity demand and limited trading volumes in China and Hong Kong also played a role in the regional market performance.