Asian Markets Stumble on Fears of Trump’s Tariffs and Fed Signals
Thursday, February 20, 2023, witnessed a sharp decline in Asian stock markets as investors grappled with the implications of President Donald Trump’s tariff threats and cautious statements from the US Federal Reserve (Fed). The Japanese yen surged, while Hong Kong’s tech sector faced a setback.
Surge in Japanese Yen
The Japanese yen witnessed a significant rise of 0.7% against the US dollar to reach 150.42 yen per dollar. This appreciation was fueled by growing expectations of interest rate hikes by the Bank of Japan (BoJ), which had already tightened policy in January after initiating monetary policy normalization last year.
Analysts anticipate that inflation figures for January, scheduled to be released Friday, will show a further increase to 4%, significantly above the BoJ’s 2% target. This could prompt the central bank to accelerate rate hikes, especially given Japan’s stronger-than-expected economic growth in the fourth quarter of 2024.
Nikkei Index Plunges
The Tokyo Stock Exchange’s Nikkei index fell by 1.74% to 38,486 points, while the broader Topix index declined by 1.60% to 2,723 points. The market was weighed down by the yen’s appreciation, as shares of major exporters, whose international sales would be impacted by a stronger yen, suffered losses. Hitachi declined by 1.59% and Canon by 1.33%.
Trump’s Tariff Threats Weigh
Investors remain concerned about the potential impact of President Trump’s tariff threats. He announced plans to impose "approximately" 25% tariffs on imported cars in the United States starting in April. Automakers, including Toyota (-2.41%), Honda (-1.94%), and Nissan (-4.01%), saw their stocks decrease. The pharmaceutical industry also faced scrutiny.
Fed Minutes Raise Concerns
Asian markets also digested the minutes of the Fed’s January policy meeting, released Wednesday. The minutes highlighted concerns about "trade and immigration policies" implemented by the Trump administration, which could lead to higher inflation in the United States and necessitate the Fed maintaining elevated interest rates for longer. Fed Chairman Jerome Powell had previously indicated that the central bank was "in no hurry" to lower rates again.
South Korea’s Cultural Sector Surges
In Seoul, stocks related to the South Korean cultural industry soared, with YG Entertainment (+12.59%), SM Entertainment (+2.59%), and Studio Dragon (+18.44%) among the top gainers. Bloomberg reported that China may ease its ban on South Korean cultural products (K-pop music, TV dramas) as early as May. Investors reacted enthusiastically to the potential opening of the vast Chinese market, where demand for South Korean culture remains strong.
Hong Kong Tech Retreats
Hong Kong’s Hang Seng index dropped by 1.38% to 22,627 points as technology stocks took a breather after recent gains driven by the success of Chinese AI company DeepSeek. Tencent lost 1.93% and Alibaba 2.66% ahead of its annual results announcement.
Oil Prices Ease
Oil prices moderated amid concerns over weak demand, despite recent supply worries sparked by Ukrainian attacks on Russian oil infrastructure. The price of WTI crude fell by 0.50% to $71.89 per barrel, while Brent crude decreased by 0.39% to $75.74 per barrel.
