The stock markets in Asia and the Pacific region opened down on Monday following hawkish comments made by Federal Reserve Chairman Jerome Powell at the Jackson Hole symposium.
South Korea’s Kospi dropped 2.2% and Japan’s Nikkei 225 lost 2.8% as of 9:30 a.m. in Thailand.
The S&P/ASX 200 in Australia fell 2.2%.
Mainland China’s Shanghai Composite dipped 0.5%, while the Hang Seng index in Hong Kong slid 1.02 %.
When speaking at Jackson Hole on Friday, Powell signaled the expected need for restrictive monetary policy for some time to manage excessive inflation and warned against relaxing monetary conditions prematurely. He also said that the U.S. economy will feel “some pain” from rising interest rates and that the trend toward higher rates is likely to continue “for some time.”
Early in Asia trade, the U.S. dollar hit a 20-year high against a basket of currencies, rising to a high of 109.4. This caused other major currencies to fall to new lows and placed pressure on their emerging market counterparts.
Also, the U.S. two-year yield rose as much as six basis points to 3.46%, the highest since November 2007, as a result of the market’s reaction to the hawkish stance expressed by central bankers around the world at the Federal Reserve’s Jackson-Hole symposium.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”