Asia Stocks, Oil Slide as Hawkish Fed Bets Spike
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- MSCI's Asia-Pacific index ex-Japan sank 2.9% while S&P 500 e-mini futures slipped 0.9% as traders repriced Fed expectations, with the Kospi plunging 8.1% and the Nikkei 225 down 3%.
- Brent crude fell 1.22% to $76.95 a barrel after settling more than 3% lower when Vice President JD Vance said progress had been made in Iran talks and the Strait of Hormuz was open.
- Fed funds futures now imply a 54% probability of at least two 25-basis-point hikes before year-end, up from 15.2% a week ago, reflecting expectations of a more aggressive Fed under new Chair Kevin Warsh.
- The yen held at 161.665 per dollar near a 40-year low, prompting Japan's Finance Minister Satsuki Katayama to hold an online meeting with US Treasury Secretary Scott Bessent about sharp currency swings.
- Wall Street fell overnight with the S&P 500 down 0.4% and Nasdaq off 1.3%, dragged by declines in megacap technology names Alphabet and SpaceX.
- Sterling weakened 0.1% to $1.3234 after UK Prime Minister Keir Starmer said he would resign, paving the way for an expected orderly transfer of power to Andy Burnham.
Why it matters: A more hawkish Fed under Kevin Warsh is forcing a rapid repricing — the implied odds of two rate hikes by year-end jumped from 15.2% to 54% in a single week. Asian equity holders absorbed the brunt Tuesday, with South Korea's Kospi alone losing 8.1%, while Japan's currency authority is already scrambling to coordinate with the US Treasury over yen weakness.
