HONG KONG – Asian markets are mostly lower today as comments by United States Treasury Secretary Janet Yellen stoked concerns about a hike in interest rates, while investors also mulled the impact of the G7 global tax plan on tech giants.
Yellen told Bloomberg News that President Joe Biden should push ahead with his US$4 trillion (RM16.5 trillion) recovery plan for the world’s top economy, even if it triggers inflation and leads to higher interest rates.
While optimism about the global economic recovery and Covid-19 vaccine roll-outs has spurred markets, trading floors remain worried that the rebound will stoke inflation, and in turn, force central banks to hike interest rates.
Yellen said any rise in prices due to Biden’s massive plan to revitalise the US economy will be transitory, and that higher interest rates are actually positive.
“If we ended up with a slightly higher interest rate environment, it would actually be a plus for society’s point of view and the Fed’s point of view,” said the former Federal Reserve chair in the interview yesterday.
“We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,” she said, adding that she wants them back to a normal level.
Yellen was speaking after returning from a meeting of G7 finance ministers in London that endorsed a global minimum corporate tax rate of at least 15%, rallying behind a US-backed plan targeting tech giants and other multinationals accused of not paying enough.
Wall Street posted solid gains, with all three main indices closing higher on Friday after a tepid jobs report eased concerns that the expanding economy will force the Fed to pull back on stimulus.
The optimism faded in Asia, with markets mostly lower today.
Hong Kong was down 0.80%, Shanghai slipped 0.2% and Sydney was off 0.2%.
Tokyo and Seoul were both up 0.2%.
“Japan’s Nikkei was the big underperformer last week, but the solid lead from the US suggests that Japan is likely to enjoy a positive start to the new week,” said Rodrigo Catril, senior FX market strategist at the National Australia Bank. – AFP, June 7, 2021
