Asian stocks drop on interest rates hike fears

Investors also worried about the rise of anti-austerity parties in Europe.

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By :  ,  Financial Analyst

Asian stocks dropped today (May 27th) on speculation that the US Federal Reserve was on track to raise interest rates later this year.

The Dow Jones and S&P 500 both lost one per cent overnight after upbeat US consumer and housing data renewed speculation that the Fed is on track to raise rates this year.

Federal Reserve Chairwoman Janet Yellen warned on Friday that a rate hike is still in the cards for 2015. She said that if the US economy continues to strengthen, “it will be appropriate at some point this year to take the initial step to raise the federal funds rate”.

Investors also had concerns that the Greek crisis could engulf Spain, as voters punished the ruling Popular Party in local elections after years of austerity policies.

"Investors are mulling the possibility of a Greek default and the changing political landscape in Spain. Anti-austerity parties are gaining traction across the eurozone's periphery, and that's driving risk-off sentiment in currency markets that are reeling from the Greek drama," Stephen Innes, senior trader at OANDA Asia Pacific, told AP.

Japan's Nikkei 225 edged down 0.1 per cent to 20,425.15 and South Korea's Kospi tumbled 1.6 per cent to 2,108.27. Hong Kong's Hang Seng was down 0.6 per cent to 28,072.28 and Australia's S&P/ASX 200 slipped 0.8 per cent to 5,725.60. The Shanghai composite index gained 0.2 per cent to 4,919.84.

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