HONG KONG: Equities sank in Asian trade Monday following another painful sell-off on Wall Street, with investors' focus on the Federal Reserve's next policy meeting this week, where officials are expected to unveil their plans to battle soaring inflation.
Tech firms -- which soared on the back of the pandemic -- led the retreat in New York after weak subscriber figures from Netflix fuelled concerns that the end of lockdowns and reopening of economies is seeing consumers changing their spending habits.
That comes as traders contemplate the end of the ultra-loose monetary policies put in place by central banks in early 2020 to cushion the impact of the Covid containment measures, with the Fed expected to start lifting interest rates from March.
Minutes from the Fed's December gathering indicated officials were turning more hawkish as they grow increasingly concerned about inflation, which is sitting at a four-decade high.
Commentators have tipped the first increase in borrowing costs in March followed by another three hikes before the end of the year, while the central bank is also forecast to start running down its vast bond-holdings that have helped keep rates down.
Economists at Goldman Sachs said at the weekend they saw increases in March, June, September and December, with July as the start of the Fed's balance sheet reduction but warned inflation pressures meant "risks are tilted somewhat to the upside of our baseline".
They also said they were concerned the virus would continue to cause supply-demand imbalances while strong wage growth was also a worry, suggesting inflation would remain an ongoing problem.
"We see a risk that the (policy board) will want to take some tightening action at every meeting until that picture changes," the economists said. "This raises the possibility of a hike or an earlier balance sheet announcement in May, and of more than four hikes this year."
The prospect of tighter policy has battered markets in recent weeks, with the Nasdaq in New York down about 15 percent from its recent peak -- tech firms are considered more susceptible to higher rates. The S&P 500 is down more than eight percent from a record high touched at the start of the month, and observers said it could see even more losses in coming weeks.
The selling filtered through to Asia, with Hong Kong and Seoul each down more than one percent, while Tokyo, Shanghai, Sydney, Singapore, Wellington, Taipei, Manila and Jakarta were also deep in the red.
Still, oil prices rallied on optimism that demand will improve as countries reopen and the Omicron variant shows signs it may be peaking, allowing people to travel more freely and providing a boost to consumption.
"Physical market demand is strong, as is optimism over Covid turning endemic," Vandana Hari, of Vanda Insights, said.
"Oil's narrative remains bullish, pointing to continued strength in prices interrupted by mild pullbacks."
Key figures around 0230 GMT
Tokyo - Nikkei 225: DOWN 0.6 percent at 27,371.11 (break)
Hong Kong - Hang Seng Index: DOWN 1.1 percent at 24,682.26
Shanghai - Composite: DOWN 0.5 percent at 3,504.21
Euro/dollar: DOWN at $1.1333 from $1.1344 late Friday
Pound/dollar: UP at $1.3562 from $1.3553
Euro/pound: DOWN at 83.57 pence from 83.67 pence
Dollar/yen: UP at 113.86 yen from 113.70 yen
West Texas Intermediate: UP 0.9 percent at $85.94 per barrel
Brent North Sea crude: UP 1.0 percent at $88.74 per barrel
New York - Dow: DOWN 1.3 percent at 34,265.37 (close)
London - FTSE 100: DOWN 1.2 percent at 7,494.13 (close)