Asian stocks slide as Powell revives Fed rate fears

TOKYO (Reuters) – Asian stocks were mostly lower on Thursday after Wall Street marked its worst monthly performance in two years as hawkish-sounding comments from new Federal Reserve Chair Jerome Powell reverberated across the broader risk asset markets.

Spreadbetters expected European stocks to open lower, with Britain’s FTSE falling 0.7 percent, Germany’s DAX slipping 0.8 percent and France’s CAC retreating 0.75 percent.

Investors have been on edge in recent weeks amid concerns that rising interest rates in advanced economies, led by the United States, could sap global growth.

Powell, in his first public appearance as head of the Fed, vowed at a Congressional hearing on Tuesday to prevent the economy from overheating while sticking with a plan to gradually raise interest rates.

Those comments rekindled speculation in equity markets over US monetary tightening this year happening faster than expected, feeding concerns that higher borrowing costs could crimp corporate activity and cool economic growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.5 percent and headed for its third day of losses.

Chinese shares bucked the trend and edged up after a private survey showed growth in China’s manufacturing sector picking up to a six-month high. Shanghai shares were 0.15 percent higher.

Australian stocks fell 0.7 percent, South Korea’s KOSPI shed 1.2 percent and Japan’s Nikkei dropped 1.55 percent.

The losses in Asia came amid a broad selloff on Wall Street, where the Dow and S&P 500 capped their worst months since January 2016 overnight after suffering sharp losses early in February.

The Dow scaled an all-time high late in January, before falling about 12 percent from that peak at the start of February as a rise in US yields to multi-year highs unnerved Wall Street. It went on to recover the bulk of those losses, but the rebound stalled in the wake of Powell’s comments.