Asian stock market: Japan’s Nikkei drops 1.9%, Hong Kong benchmark flat on hawkish Fed minutes; USD gains

Outside of Japan, MSCI's broadest index of Asia-Pacific shares fell 0.53%, while Japan's Nikkei fell 1.9%. Chinese blue chips fell 0.4%, while the Hong Kong benchmark remained unchanged, boosted by mainland developers after local governments eased property restrictions.

Asian stocks fell in line with a worldwide selloff on Thursday, as markets were scared by more aggressive comments from US policymakers on the need for tighter monetary policy, keeping the dollar around a two-year high.

Outside of Japan, MSCI's broadest index of Asia-Pacific shares declined 0.53 %, while Japan's Nikkei fell 1.9 %.

"The United States' entire political and policy stance has evolved, and markets are starting to notice," said Redmond Wong, a market strategist at Saxo Markets Hong Kong. "After all those Fed speakers and the minutes yesterday, the focus has shifted to quantitative tightening, with the goal of tightening financial conditions and depressing aggregate demand." I believe the Fed is willing to accept some slack and wants to cool down the labour market, rather than protecting it as in the past."

The minutes of the Fed's March 15-16 meeting, released on Wednesday, revealed officials' growing concern that inflation had spread throughout the economy. Lael Brainard, the governor of the Federal Reserve in the United States, stated on Tuesday that she expects the central bank's balance sheet to shrink quickly.

Positive real interest rates, according to Wong, would be excellent for the global economy in the long run, but there would be a repricing of assets in the medium term.

All three major U.S. benchmarks sank overnight, with the Nasdaq Composite shedding 2.22%. S&P 500 futures lost 0.26% in Asia, while Nasdaq futures fell 0.22%.

The scenario in China, which is dealing with a new outbreak of COVID-19, was also on investors' concerns.

Shanghai, which is now under city-wide lockdown, recorded roughly 20,000 new cases on April 6 – the great majority of which were asymptomatic, according to the local administration.

Chinese blue chips fell 0.4%, while the Hong Kong benchmark remained unchanged, boosted by mainland developers after local governments lifted property regulations.

Prior to the release of the Fed's minutes, US Treasuries had sold off strongly before stabilising.

In early Asia on Thursday, the yield on 10-year Treasury notes remained unchanged at 2.590 %, while the yield on 2-year Treasury notes was somewhat lower at 2.4511 %, making this carefully monitored section of the yield curve slightly steeper after starting the week inverted.

The potential of US quantitative tightening held the dollar around a two-year high against a basket of currencies in currency markets.

Commodity currencies' slide from recent highs due to a drop in oil prices also helped the dollar index. The euro has also dropped to a one-month low, weighed down by a "double threat" from the economic impact of additional Russian sanctions and uncertainty about the outcome of the French election, according to ING analysts.

Oil prices climbed on Thursday after plummeting to a three-week low the day before after major consuming nations stated they would release oil from stockpiles to ease supply constraints.

Brent crude futures were up 1.5 % to $102.55 a barrel, while U.S. crude was up 1.3 % to $97.35.