Hong Kong (AFP) - Asian markets fell Friday, tracking another loss in New York as interest rate hike fears course through trading floors after last week's blockbuster jobs report.
While data in recent months has shown inflation is coming down, the employment figures showed the economy remained robust, leading several top Federal Reserve officials to warn much more work was needed to get prices under control.
Having spent January optimistic that the days of central bank tightening would soon come to an end, traders have been brought back down to earth this month as they contemplate borrowing costs going higher and staying there longer than expected.
Richmond Fed president Thomas Barkin added his voice to colleagues this week in warning that the bank had to "stay the course" in lifting rates if it wanted to bring inflation down to its two percent target.
However, with the cost of borrowing going higher still -- and some warning it could go to a two-decade-high six percent -- fears are growing that the world's top economy will tip into recession.
"Inflation most likely won't get conquered if the economy doesn't break," said OANDA's Edward Moya.
"Disinflation trends remain in place but it will be hard for them to continue with a strong labour market and as the economy keeps on growing.We've seen commodities and goods price declines, but core services remain tricky."
He added that the Fed would continue hiking until personal consumption expenditure -- the bank's preferred inflation gauge -- was trending sharply lower."And that might not happen until the summer," he said.
After Wall Street's retreat, most of Asia was in the red.
Hong Kong led the losses, shedding two percent, as tech firms suffered more heavy selling pressure, while there were also losses in Shanghai, Sydney, Seoul, Singapore, Taipei, Mumbai, Bangkok and Jakarta.
'Not out the woods'
Tokyo ended higher on a weaker yen, though the currency rallied after the market closed on reports that the Japanese government would nominate Kazuo Ueda to replace Haruhiko Kuroda as head of the country's central bank.
Ueda is an economist and former member of the Band of Japan policy board.But analysts said the yen's advance may be more to do with the fact deputy governor Masayoshi Amamiya would not take the post, which would have likely seen a continuation of the current dovish approach.
Paris and Frankfurt fell at the open.
London also retreated, even as data showed the UK economy averted recession in the final three months of the year by registering zero growth, having contracted in the previous quarter.
Gross domestic product expanded 4.1 percent last year overall, after growth of 7.4 percent in 2021, the Office for National Statistics said.
Finance minister Jeremy Hunt welcomed the news but warned about sky-high consumer prices that have sparked a cost-of-living crisis.
He added: "We are not out the woods yet, particularly when it comes to inflation."
Analysts said next week's consumer price index release will be a key data point, which could play a big role in the Fed's plans for future rate hikes.
"Whether or not the Fed has tightened financial conditions sufficiently to bring inflation down to target over time is going to be the most significant debate in the market agenda through the first half of the year," said SPI Asset Management's Stephen Innes.
He added that "the fear is now that we could still be talking rate hikes in the third quarter".
Key figures around 0820 GMT
Tokyo - Nikkei 225: UP 0.3 percent at 27,670.98 (close)
Hong Kong - Hang Seng Index: DOWN 2.0 percent at 21,190.42 (close)
Shanghai - Composite: DOWN 0.3 percent at 3,260.67 (close)
London - FTSE 100: DOWN 0.2 percent at 7,893.67
Euro/dollar: UP at $1.0746 from $1.0739 on Thursday
Pound/dollar: UP at $1.2127 from $1.2117
Euro/pound: UP at 88.61 pence from 88.60 pence
Dollar/yen: DOWN at 130.22 yen from 131.56 yen
West Texas Intermediate: DOWN 0.5 percent at $77.64 per barrel
Brent North Sea crude: DOWN 0.5 percent at $84.12 per barrel
New York - Dow: DOWN 0.7 percent at 33,699.88 (close)
