Asian markets fell on Friday following another wave of losses on Wall Street as traders returned their focus to the Federal Reserve’s plans to ramp up interest rates, while oil prices sank from their seven-year highs.

Angst about the Fed’s determination to fight surging inflation by removing its ultra-loose monetary policy is dealing a severe blow to the rally in global markets that has run virtually uninterrupted for nearly two years, leaving most markets in the red at the start of 2022.

Officials have started tapering the massive bond-buying put in place at the start of the coronavirus pandemic and it is widely expected they will start lifting borrowing costs from March, though by how much is a matter of speculation.The Fed has also said it will begin offloading the bonds it already has on its books, which have been key in helping keep rates low, though it is not clear how quickly it will do that.

Markets are now awaiting the Fed board’s meeting next week, hoping it will provide a clear idea about its timetable for policy normalisation. But with key officials now in a black-out period ahead of the gathering, there is little information for investors to work with, fuelling uncertainty and volatility.

Wall Street’s three main indexes closed deep in negative territory again – having spent much of the day well up – with tech firms again the big losers, owing to their susceptibility to higher rates.

Adding to the selling was data showing a pick-up in US jobless claims and a far-weaker-than-expected reading on a key manufacturing index, which all suggest that while the Omicron COVID variant is less severe than feared, it is still causing concern.

Traders are also keeping a nervous eye on Ukraine, where Russia’s troop build-up is fanning fears Moscow is planning an invasion.

Traders are also keeping a nervous eye on Ukraine, where Russia’s troop build-up is fanning fears Moscow is planning an invasion

And, having enjoyed a healthy run-up on Thursday on the back of further easing measures by China, Asian equities followed suit. Sydney lost more than two per cent, while Wellington and Taipei were more than one per cent down.Shanghai, Seoul, Singapore and Mumbai were also off. However, Hong Kong managed to eke out a small gain at the end thanks to late bargain-buying, while Manila and Jakarta also rose. London, Paris and Frankfurt opened sharply lower.

The sell-off in equities was matched by sharp drops in the oil market, with both contracts down more than one per cent after data showed US stockpiles at an eight-week high with gasoline supplies beating forecasts. The losses come after Brent and WTI hit peaks not seen since 2014 owing to optimism about the global recovery and demand outlook. 

However, analysts still expect further gains, with Morgan Stanley joining Goldman Sachs in predicting $100 a barrel in the third quarter. “We’ve been seeing some good gains this week, it’s not surprising we are seeing a bit of a pullback,” said Daniel Hynes at Australia & New Zealand Banking Group. “The outlook is still pretty bright, however, nothing has fundamentally changed.”