HONG KONG - Asian markets tumbled as investors grow increasingly sceptical that the Federal Reserve will cut interest rates as much as hoped this year, while a massive earthquake in Taiwan added to the sense of gloom.
Traders have pushed equities higher for months, driven by optimism that the central bank will begin easing monetary policy this year as inflation comes back towards officials' two percent target.
But forecast-busting data on a range of indicators including inflation, factory activity and jobs has dealt a hefty blow to those hopes, and now expectations are beginning to wane.
The year began with expectations for six cuts in 2024 but that has slowly been whittled down to three, and some are now concerned that the Fed could even cut fewer than that.
After a retreat on Wall Street, which has also been fuelled by profit-taking after a run-up that has seen the Dow and S&P 500 hit multiple records, markets across Asia struggled.
Tokyo sank around one percent, while Sydney and Seoul were off more. Hong Kong, Shanghai, Singapore, Wellington, Manila and Jakarta were also well in the red.
Taipei fell after a 7.4-magnitude earthquake just off Taiwan's east coast, which added to the regional uncertainty, though there was some relief that the threat of a tsunami had dissipated.
Still, traders were keeping tabs on the effects of the tremor, which left several buildings collapsed and forced chip giants TSMC and United Microelectronics Corporation to halt work at their plants.
TSMC was down more than one percent and UMC shed one percent.
Gold prices briefly struck a fresh record high of $2,288, building on its run this year that has been fuelled by hopes for central bank rate cuts as well as rising tensions in the Middle East, which has boosted its demand as a safe haven in times of turmoil.