By Andrew Galbraith

SHANGHAI (Reuters – Asian shares plunged on Thursday. The Federal Reserve minutes indicated that the U.S. would see a higher-than expected rise in interest rates, citing persistent inflation fears.

In order to increase riskier assets, there are growing worries about higher U.S. rates and the spread of Omicron coronavirus.

Asian shares took cues from Wall Street’s overnight losses. The Nasdaq dropped more than 3% Wednesday. This is the largest percentage drop in one day since February.

MSCI’s Asia-Pacific Shares Index outside Japan lost 0.95%. Australian shares dropped 1.53% while the stock index declined 2.08%.

Chinese blue-chips dropped 1.37% after a survey by the private sector showed that China’s service industry activity increased more rapidly in December. However, ongoing COVID-19 epidemics have impacted the outlook.

A similar investor rotation in technology continues to impact high-profile companies with Sony The Group is in decline by 6.8%.

There is the possibility that the Fed could fall into the trap by making policy mistakes. They may have to raise interest rates sooner than anticipated, but due to the timing of the end of quantitative easing, this could be accompanied by a slower economic cycle as well as a decrease in base inflation. Carlos Casanova, Senior Economist for Asia at Union Bancaire Privee, Hong Kong.

You will see more outflows of Asian assets if the Fed is pricing at a slower pace. This could lead to weaker equity markets and depreciatory pressures in the FX market.

According to minutes, Fed policymakers indicated at December’s meeting that the Fed might need to raise interest rates sooner that expected due to a tight job market and unabated inflation.

Minutes revealed that Fed officials expressed concern about both the rate of inflation and global supply shortages, which were expected to continue, in unison.

U.S. Treasury yields also rose due to the more cautious than anticipated views of U.S. central banks officials. The U.S. 10-year yield was at 1.6929% on Thursday, which is just a fraction of Wednesday’s closing price of 1.7030%.

The U.S. 5-year and 2-year yields were at their lowest levels since the beginning of 2020.

The dollar was supported by higher U.S yields, but the currency lost some ground to the Japanese yen, after reaching five-year highs earlier in the week. It fell 0.13%, to 115.95.

The euro was steady at $1.1311, and little had changed at 96.161.

After OPEC+ producers agreed on a boost in production, the global benchmark for commodity markets fell 1.26% at $79.78 per bar and dropped 1.07% to $77.02 per barrel.

It was steady at $1.808.90 an troy ounce. However, higher U.S. bond yields didn’t diminish the precious metal’s shine. [GOL/]