Asian markets, US futures fall after the Fed signaled a rate hike in March

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Investors worry that higher US interest rates could cause capital to leave Asia’s emerging markets and spur currency depreciation in the region, causing financial turbulence.

Japanese Nikkei (N225) fell 3.3% on afternoon trading, exacerbating previous losses.
Korea Kospi (KOSPI) fell 3.2 per cent. The index is about to fall into a bear market and last traded more than 20% from a peak in July last year.
The Fed is preparing to raise interest rates

Tech stocks fell sharply. An index in Hong Kong, which tracks the largest Chinese technology companies, fell more than 4%. Alibaba fell more than 6%.

Softbank (SFTBF) and Tokyo Electron – a large Japanese semiconductor and electronics company – also fell 9% and 5% in Tokyo, respectively.
On Wall Street, Dow (FOLLOWING) futures fell around 440 points. S&P 500 (INX) and Nasdaq (COMP) fell 1.5% and 1.9%, respectively. The three indices closed slightly lower on Wednesday.
The falls come after Federal Reserve Chairman Jerome Powell signaled that the Fed is about to raise interest rates, even though the central bank kept interest rates close to zero for now.

“I would say that the committee is prepared to raise the federal funds rate at the March meeting, provided the conditions are right to do so.” he told reporters on Wednesday.

In a statement, the Fed said it would “soon be appropriate to raise the target range for the federal funds rate,” with inflation well above 2% and a strong labor market.

Expectations of higher US interest rates pushed a key dollar index to its highest level in almost a month. The US Dollar Currency Index – which measures the strength of the dollar against a basket of currencies used by US trading partners – has risen 0.7% to trade at 96.65.

Outside of external growth shocks, “there is little that would prevent the Fed from raising interest rates at its March meeting,” Kerry Craig, global market strategist for JP Morgan Asset Management, wrote in a note Thursday. He added that a tightening of Fed policy would probably “increase market volatility during the year. “

Xi Jinping urges West not to 'hit the brakes' by raising interest rates too quickly

The International Monetary Fund recently warned that emerging markets and developing economies should prepare for possible turbulence in financial markets as US and Europe raise policy rates.

“Higher returns elsewhere will encourage capital to flow overseas, which will put downward pressure on emerging markets and developing economic currencies and increase inflation,” the organization said in its world economic outlook report on Tuesday.
And Chinese President Xi Jinping last week urged central banks in the West not to raise interest rates too quickly to fight inflation as his country moves in the other direction to fight a sharp economic downturn.

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