Most Asian stock markets sank on Wednesday tracking overnight losses on Wall Street, with technology-heavy indexes losing the most as caution kicked in ahead of the minutes of the Federal Reserve’s February meeting. Japan’s Nikkei 225, the Taiwan Weighted index, and South Korea’s KOSPI were the worst performers for the day, losing between 0.8% and 1.4%. Tech-heavy indexes bore the worst of the selling as U.S. Treasury yields surged overnight in anticipation of the Fed minutes, due later on Wednesday. Wall Street indexes also retreated overnight, with the Nasdaq Composite leading losses among its peers. The Fed minutes are widely expected to reiterate the central bank’s hawkish rhetoric, which is now expected to carry more weight in the light of stronger-than-expected inflation readings for January. Rising interest rates bode poorly for Asian stocks by limiting liquidity conditions, as higher yields drive capital away from risk-heavy assets. Regional markets are also expected to suffer from increased risk aversion, especially as traders grow wary of a potential U.S. recession. Risk-heavy Southeast Asian stocks logged sharp declines on Wednesday, with bourses in the Philippines and Indonesia losing more than 1% each. Stronger-than-expected U.S. PMI data released overnight showed that the world’s largest economy was yet to see cooling activity. The strong reading also gives the Fed more economic headroom to raise interest rates.

The U.S. Personal Consumption Expenditures index.

– the Fed’s preferred inflation gauge – is also due this week, and is expected to reiterate that inflation remained sticky in January. Concerns over the Fed largely offset some optimism over a Chinese economic recovery this year, which is expected to benefit Asian markets. But initial readings from the country indicate a staggered recovery, even as the country relaxed most anti-COVID measures earlier this year. China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.6% and 0.3%, respectively. Hong Kong’s Hang Seng index was the sole gainer among Asian markets on Wednesday, rising marginally on strength in HSBC Holdings PLC (HK:0005). Shares of the bank rallied over 4% after it logged strong fourth-quarter earnings. Sentiment towards Hong Kong was also somewhat helped by data showing the city’s economy shrank slightly less than initially estimated in the fourth quarter. Australia’s ASX 200 index fell 0.5%, as strong wage growth data showed some resilience in the jobs market, giving the Reserve Bank more headroom to keep raising rates.