Asian stocks slump as Fed jitters, M.east fears rattle risk appetite

investing.com:

Investing.com-- Asian stocks extended steep losses on Friday as a rout in global bond markets continued to decimate risk appetite, while traders remained on edge over any more escalation in the Israel-Hamas war. 

Regional markets were spooked by a sharp sell-off in global bonds this week, which reached a fever pitch on Thursday after comments from Federal Reserve Chair Jerome Powell indicated that an interest rate hike was still being considered this year.

A slew of other Fed officials mirrored Powell’s stance, especially as recent data pointed to stickiness in U.S. inflation. Wall Street indexes closed lower overnight following a spike in Treasury yields, providing a weak lead-in to regional markets. 

Higher interest rates bode poorly for Asian markets, given that they diminish their risk-heavy appeal, and also limit foreign capital flowing into the region. 

The Nikkei 225 index sank 0.6%, and was on course for a 3.2% loss this week as data on Friday showed that Japanese consumer price index inflation grew more than expected in September.

A core inflation reading, which is closely watched by the Bank of Japan, also remained close to over 40-year highs, indicating that underlying inflation remained sticky. 

Comments from former BOJ officials also suggested that the bank could end its negative rate regime by as soon as December, ending nearly a decade of easy monetary policy enjoyed by Japanese stocks. Loose monetary conditions were a key driver of a Japanese stock rally this year, which saw the Nikkei reach 30-year highs. 

A spike in global bond yields weighed heavily on Asian technology stocks this week, as the prospect of higher interest rates diminished the appeal of growth stocks.

Weak third-quarter profit figures