Asian markets plunged into the red Wednesday following a rout on Wall Street as investors fret over surging inflation, the end of the Federal Reserve's financial support and a standoff on Wall Street that could end with a catastrophic US debt default.

Ongoing worries about the potential collapse of Chinese property giant Evergrande, an energy crunch in China and the ever-present spectre of the Delta Covid variant were also dragging the mood down on trading floors.

After a year and a half of ultra-loose monetary policy from the Fed and other central banks -- helping fire a global economic recovery and send equities to record or multi-year highs -- officials have signalled they are ready to take away the punch bowl.

While broadly expected, the decision comes as inflation continues to surge owing to supply chain problems as well as a spike in energy costs -- Brent crude broke $80 for the first time in three years on Tuesday.

The Fed last week indicated it would start winding down its massive bond-buying programme by the end of the year, while a gauge of future interest rates suggested a hike could come before 2023.

The news was initially taken in stride, but a surge in Treasury yields this week has sparked panic that the Fed could tighten much earlier and quicker than initially thought as inflation takes off. The dollar largely held on to recent gains as higher yields make the currency more attractive to investors.

This has led to talk of a possible period of damaging "stagflation", where inflation surges but economic growth remains subdued.

The Nasdaq led a sharp sell-off in New York as tech firms are more susceptible to higher rates as they borrow cash to fuel growth.

"What we got here is a stock market that finally looks vulnerable as Treasury yields surge, oil prices look like they could easily hit $90 a barrel, and as supply chain issues show no signs of easing," said OANDA's Edward Moya.

"The Fed was willing to tolerate a little inflation overshoot, but the current energy crunch could force a major pivot before the end of the year."

In early Asian trade, Tokyo tanked more than two percent, having enjoyed a strong run in recent weeks on hopes for more stimulus from a new prime minister, while Seoul was off two percent. Shanghai, Sydney, Taipei and Manila lost more than one percent.

Hong Kong, Singapore and Wellington fared slightly better, though Jakarta edged up.

Investors are also keeping an increasingly worried eye on Washington where lawmakers are bickering over raising the US debt ceiling.

Republicans have refused to agree to the move, despite top officials including Treasury Secretary Janet Yellen and Fed boss Jerome Powell warning of an economic thunderbolt if the country fails to meet its bond repayment obligations.

Yellen said a deal needs to be done before the cash runs out around October 18.

Separately, the government could shut down later this week unless Congress approves a temporary budget measure by Thursday.

That comes as Democrats struggle to pass Joe Biden's multi-trillion-dollar infrastructure and social spending bills, with party infighting fuelling concerns that the president's agenda could collapse.

- Key figures at 0230 GMT -

Tokyo - Nikkei 225: DOWN 2.5 percent at 29,,442.14 (break)

Hong Kong - Hang Seng Index: DOWN 0.5 percent at 24,369.10

Shanghai - Composite: DOWN 1.2 percent at 3,558.87

Dollar/yen: UP at 111.50 yen from 111.48 yen at 2045 GMT

Euro/dollar: UP at $1.1690 from $1.1683

Pound/dollar: UP at $1.3547 from $1.3537

Euro/pound: UP at 86.28 pence from 86.26 pence

West Texas Intermediate: DOWN 1.1 percent at $74.47 per barrel

Brent North Sea crude: DOWN 1.2 percent at $78.11 per barrel

New York - Dow: DOWN 1.6 percent at 34,299.99 (close)

London - FTSE 100: DOWN 0.5 percent at 7,028.10 (close)

Related Links
Global Trade News

Tweet

Thanks for being here; We need your help. The SpaceDaily news network continues to grow but revenues have never been harder to maintain. With the rise of Ad Blockers, and Facebook - our traditional revenue sources via quality network advertising continues to decline. And unlike so many other news sites, we don't have a paywall - with those annoying usernames and passwords. Our news coverage takes time and effort to publish 365 days a year. If you find our news sites informative and useful then please consider becoming a regular supporter or for now make a one off contribution.
SpaceDaily Contributor $5 Billed Once credit card or paypal		SpaceDaily Monthly Supporter $5 Billed Monthly paypal only

Evergrande founder calls for construction, sales to resume
Beijing (AFP) Sept 23, 2021
The head of teetering Chinese developer Evergrande has urged staff to resume construction and sales to deliver properties, state media reported Thursday, as the firm battles to avoid a collapse that could send shockwaves through the world's number two economy. Furious homebuyers and investors around the country have gathered to demand repayment as the developer drowns in a sea of debt worth more than $300 billion, and struggles to meet its obligations. The comments came as the company was due to ... read more