Asian markets were broadly lower on Monday as the recovery from June lows faltered on renewed concerns about the US Federal Reserve’s plans to hike interest rates to combat runaway inflation.
All eyes are on a symposium in Jackson Hole, Wyoming, where Fed Chair Jerome Powell will deliver a speech, which will be followed to get an idea of the bank’s next steps.
A fall in price gains and signs of an economic slowdown had raised hopes that policymakers would ease after two consecutive 75 basis point hikes – and possibly cut next year – and help global stocks recover.
But that optimism has slowly eroded in recent weeks as Fed officials, including Powell, have warned that the battle against inflation is far from over, especially as the labor market remained resilient.
One of the most recent was Richmond Fed Chairman Thomas Barkin, who reiterated his commitment to bring inflation back to 2% from a four-decade high of around 9%.
He said on Friday the political executive would “do whatever it takes to get there,” but warned: “There is a way to get inflation under control, but a recession could happen in the process.”
Barclays’ Jonathan Millar said Powell was unlikely to signal a slowdown in rate hikes this week.
“It seems like what we’ve heard from Powell so far suggests there’s a pretty high bar for them to move from aggressive rate hikes to 25 basis points.
“One thing they definitely want to communicate is that they will remain very focused on price stability issues and will be very cautious on any signs of improving inflation data.”
And National Australia Bank’s Rodrigo Catril added that the Fed chair is likely to say that “while we’re near the end of the current tightening cycle, we’re a long way from the end”.
All three of Wall Street’s major indices fell on Friday, with Asia following in early trade.
Hong Kong, Tokyo, Sydney, Seoul, Taipei, Manila and Jakarta were all canceled.
However, Shanghai rose after China’s central bank cut interest rates to bolster the world’s second-biggest economy, which has been hit by lockdowns across the country as part of leaders’ zero-Covid strategy.
Singapore and Wellington also gained.
The prospect of further interest rate hikes in the US gave a further boost to the dollar, which rallied against the yen and is approaching 140 yen for the first time in 24 years.
The stronger greenback helped keep oil prices low, while speculation about a possible nuclear deal with Iran that could ease a supply crisis caused by Russia’s invasion of Ukraine added to downward pressure.
“The global balance for the remainder of the year is not as tight as many expected as Russian supply holds up well,” said Warren Patterson of ING Groep NV.
“While it may take several months for Iran to bring production back to pre-sanction levels in the event of a deal, in the short term they should still be able to boost exports by relying on storage.”
– Key figures at 0230 GMT –
Tokyo – Nikkei 225: down 0.4 percent at 28,805.52 (breakout)
Hong Kong – Hang Seng Index: down 0.1 percent at 19,755.48
Shanghai — Composite: up 0.4 percent to 3,270.83
Euro/Dollar: DOWN at $1.0032 from $1.0034 on Friday
Pound/dollar: DOWN at $1.1822 from $1.1827
Euro/pound: up to 84.86p from 84.81p
Dollar/yen: up at 137.30 yen from 136.93 yen
West Texas Intermediate: FALSE, up 1.2 percent at $89.69 a barrel
North Sea Brent Crude: FALSE, up 1.1 percent at $95.68 a barrel
New York – Dow: MINUS 0.9 percent at 33,706.74 points (close)
London – FTSE 100: up 0.1 percent at 7,550.37 (close)
#Asian #markets #fall #traders #eye #Key #Powells #speech
