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Japan’s Nikkei drops 1% as Asia markets mostly slip after U.S. Fed signals rate hikes in 2023

SINGAPORE — Shares in Asia-Pacific were mixed in Thursday morning, as investors watched for market reaction after the U.S. Federal Reserve on Wednesday moved up its timeline for rate hikes.

In Japan, the Nikkei 225 fell 1.18% in afternoon trade while the Topix index dipped 0.75%. South Korea’s Kospi declined 0.38%.

Mainland Chinese stocks were higher by the afternoon, as the Shanghai composite gained 0.17% while the Shenzhen component advanced 0.86%. Hong Kong’s Hang Seng index rose 0.28%.

The S&P/ASX 200 in Australia fell 0.2%. Australia’s employment increased by 115,000 people from April to May, the country’s Bureau of Statistics said Thursday. That was far higher than a 30,000 increase in employment expected by analysts in a Reuters poll.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.49%.

Trading of Next Digital halted

Trading of Next Digital shares in Hong Kong was halted on Thursday, according to an exchange notice.

That came after the Apple Daily, which is published by Next Digital, reported Thursday that five of its directors — including the publication’s editor-in-chief and CEO — were arrested by Hong Kong police.

The Hong Kong police had earlier said it arrested five directors of an unnamed company for “collusion with a foreign country or with external elements to endanger national security.”

Fed brings forward timeline for rate hikes

The Fed on Wednesday brought forward the time frame on which it will next raise interest rates, with the so-called dot plot of individual member expectations pointing to two hikes in 2023.

“The new Fed ‘dot plot’ indicating that the median FOMC member now forecasts two Fed rate hikes in 2023, versus none in the March iteration, represented the hawkish surprise out of the June Fed meeting,” Ray Attrill, head of foreign exchange strategy at National Australia Bank, wrote in a note.

The Dow Jones Industrial Average dropped 265.66 points overnight stateside to 34,033.67 while the S&P 500 slipped 0.54% to 4,223.70. The Nasdaq Composite shed 0.24% to 14,039.68.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 91.396 as compared with levels below 90.5 seen earlier this week.

The Japanese yen traded at 110.68 per dollar following a sharp weakening recently from below 110 against the greenback. The Australian dollar changed hands at $0.7627, lower than levels above $0.77 seen earlier in the week.

Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures declining 0.6% to $73.94 per barrel. U.S. crude futures slipped 0.57% to $71.74 per barrel.

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