Asian markets slid at the start of a key week for equities on Monday as the US Federal Reserve prepares to hike interest rates again and some of the world’s largest companies report earnings.
While the US Federal Reserve is widely expected to hike borrowing costs by 75 basis points, traders will be brooding over policymakers’ views on the prospects for the world’s largest economy as they seek to rein in inflation while spurring growth .
The decision comes a day ahead of the release of second-quarter gross domestic product data, with some observers warning of a second straight decline in what is being seen as a technical recession.
All three of Wall Street’s main indexes ended lower last week, ending a three-day rally after a big data drop in the key services sector.
And Asia fared little better, with Tokyo, Hong Kong, Shanghai, Sydney, Taipei, Manila, Jakarta and Wellington all in the red, although there were small gains in Singapore and Seoul.
Investors are also awaiting earnings releases from business titans Apple, Amazon and Google parent Alphabet.
The numbers will give a clearer idea of the impact of rising inflation and interest rates on consumer spending and corporate profits.
However, analysts remain cautious on the outlook as stock markets’ attention shifts from rising prices to economic growth, with some saying a slowdown could allow banks to ease monetary tightening.
Fed chairmen have already said their top priority is bringing inflation down from four-decade highs, even at the expense of growth.
“We still see further downside risks for risky assets as recession fears mount and central banks remain determined to fight inflation at the expense of growth,” said Standard Chartered strategist Eric Robertsen.
And Stephen Innes of SPI Asset Management added: “While rising jobless claims, weaker home sales and a build-up in gas inventories show that the Fed’s rate hikes are ahead of the game causing a slowdown and bringing inflation under control, the question is at what cost . “
The economic slowdown — and the expected collapse in demand — continue to put pressure on oil prices, with both major contracts falling sharply on Monday.
Crude has given up most of its gains since the Russian invasion of Ukraine, and Vanda Insights’ Vandana Hari said she’s seen more losses.
“Although prices have been volatile, I expect renewed downward pressure on crude oil,” she said, adding that the Fed’s decision “will likely serve as a renewed reminder of the economic headwinds ahead.”
– Key figures at 0230 GMT –
Tokyo – Nikkei 225: down 0.7 percent at 27,710.72 (breakout)
Hong Kong – Hang Seng Index: down 0.7 percent at 20,464.49
Shanghai — Composite: down 0.2 percent at 3,265.06
Euro/Dollar: DOWN at $1.0205 from $1.0220 on Friday
Pound/Dollar: DOWN at $1.1992 from $1.1998
Euro/Pound: UP at 85.10p from 85.07p
Dollar/Yen: DOWN at 136.02 yen from 136.05 yen
West Texas Intermediate: FALSE up 1.0 percent to $93.80 a barrel
North Sea Brent Crude: FALSE, up 0.7 percent at $102.45 a barrel
New York – Dow: down 0.4 percent at 31,899.29 (close)
London – FTSE 100: up 0.1 percent at 7,276.37 (close)
— Bloomberg News contributed to this story —
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