Asian markets sink with Wall St after Fed minutes

Asian markets turned lower Thursday, tracking a sell-off on Wall Street as investors were spooked by Federal Reserve minutes showing it is mulling a plan to tighten monetary policy by sucking cash out of the financial system.

New York's three main indexes turned lower on news that central bank policymakers were considering stopping, or at least slowing, the policy of reinvesting the income received from its $4.5 trillion-worth of Treasury bills and other assets.

Because the Fed's involvement in the bond market helps suppress interest rates, its decision to leave it would reduce the amount of cash in the system.

The Fed also noted "some participants (in the March meeting) viewed equity prices as quite high relative to standard valuation measures".

The report overshadowed data showing a better-than-forecast jump in private-sector hiring, days ahead of closely watched jobs figures from the government.

"This is huge news for traders in fixed interest and global markets more broadly. It means that a source of demand in US fixed interest markets is going to be reduced," said Greg McKenna, chief market strategist at AxiTrader, in a note.

"Maybe not today, maybe not tomorrow but taking the Fed out of the bond market will reverberate across global financial markets," he said.

- 'Considerable uncertainty' -

Experts said the bank's decision to flag the move may have been to prepare markets in advance, in a bid to avoid the so-called "taper tantrum" of 2013 that hit stocks after the Fed's decision to cut back its monetary easing programme.

The minutes of the March meeting -- in which the bank hiked interest rates -- also showed policy board members saw "considerable uncertainty" about the effects Donald Trump's pledged tax-cut and infrastructure spending stimulus would have on the US economy.

The tycoon's promises helped fuel a four-month surge across global markets but that faltered in March after his failure to push through a key healthcare bill raised concerns about the chances for the rest of his agenda.

Tokyo ended 1.4 percent lower, with the dollar retreating against the yen as traders bet the minutes suggested the Fed's need to raise interest rates had been dampened.

Hong Kong lost 0.5 percent as Sydney fell 0.3 percent while Seoul lost 0.4 percent and Singapore 0.2 percent. However, Shanghai closed 0.3 percent higher.

"With the Fed minutes showing officials saying valuations for US shares may be high, it's difficult to take on additional risk," said Juichi Wako, a senior strategist at Nomura Holdings.

Investors were already nervous ahead of a two-day summit between US President Donald Trump and his Chinese counterpart Xi Jinping that begins Thursday.

The meeting comes after Trump's long-running criticism of China's trade policy -- which he says is unfair to the US -- and accusations it is a currency manipulator.

In early European trade London fell 0.8 percent, while Paris and Frankfurt each lost 0.6 percent.

- Key figures at 0800 GMT -

Tokyo - Nikkei 225: DOWN 1.4 percent at 18,597.06 (close)

Hong Kong - Hang Seng: DOWN 0.5 percent at 24,273.72 (close)

Shanghai - Composite: UP 0.3 percent at 3,281.00 (close)

London - FTSE 100: DOWN 0.8 percent at 7,273.45

Euro/dollar: UP at $1.0678 from $1.0672 at 2040 GMT

Pound/dollar: DOWN at $1.2481 from $1.2491

Dollar/yen: DOWN at 110.50 from 110.67 yen

Oil - West Texas Intermediate: DOWN 21 cents at $50.94 per barrel

Oil - Brent North Sea: DOWN 19 cents at $54.17

New York - Dow: DOWN 0.2 percent at 20,648.15 (close)

 source: AFP