Markets have been buffeted by recent economic headwinds. Faster-than-expected-wage growth in the U.S. was the spark that sent markets around the world into a tailspin, igniting worries about growing inflation pressures, and fanning expectations that the U.S. Federal Reserve may need to douse an overheating economy with a rapid succession of rate increases.
The accompanying spike in U.S. long-term interest rates is of particular concern for Asia: After years of credit-fueled growth, the region has become vastly more sensitive to changes in funding costs. Even a small uptick in interest rates could slow demand as companies and households need to put more money aside to service their debt, leaving less for other purchases.