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Asian markets shaken again by Bank of England's hawkish tone

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The BOE stoked market fears of a faster pace of monetary tightening policy in commenting that monetary policy will “need to be tightened somewhat earlier and by a somewhat greater extent” compared to November.

ASIAN markets were shaken up again on Friday morning after the Bank of England (BOE) hinted at an earlier-than-expected tightening of monetary policy overnight, capping a volatile week for global markets.

Stocks in Singapore, Malaysia, Hong Kong, Tokyo and Australia were a sea of red when their respective markets opened.

On the Singapore Exchange, the benchmark Straits Times Index lost 56.18 points, or 1.64 per cent, to 3,359.72 as at 9.39am.

The three Singapore banks, Singtel and Keppel Corp were some of the largest losers by value.

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Hong Kong's Hang Seng Index plunged more than 900 points to go below the 30,000 mark in early trades. Tokyo's Nikkei index fell 3.19 per cent, Australia's S&P/ASX200 index 1.5 per cent, and Malaysia's FTSE Bursa Malaysia Kuala Lumpur Index 1.7 per cent.

The regional bloodbath followed big falls on Wall Street and in Europe overnight.

The BOE stoked market fears of a faster pace of monetary tightening policy in commenting that monetary policy will "need to be tightened somewhat earlier and by a somewhat greater extent" compared to November.

It also upgraded its growth and inflation forecast in the accompanying inflation report. This sent UK yields four to nine basis points higher across the curve, and drove equities 1.5 per cent lower.

US yields initially pushed higher, with the 10-year yield hitting as high as 2.88 per cent, before falling back.

IG market strategist Pan Jingyi said that the hawkish guidance by the BOE "certainly renewed jitters" for a market concerned about looming risks from higher borrowing costs.

"For US yields, there is the added pressure as worries mounted over the government deficit with lawmakers dwelling over a substantial two-year spending bill," she said.

Nevertheless, Mizuho Bank is expecting the rise in yields to stay controlled due to the unsteady equity markets, even as it will eventually march higher given the robust global growth, expansionary fiscal policy, and a retreat from quantitative easing by major central banks.

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