Home ›› 25 Aug 2022 ›› Stock
Asian and European equities fell Wednesday as investors awaited news on the next US interest rate hikes.
With the Jackson Hole meeting of central bankers this week, focus is on what US Federal Reserve chief Jerome Powell will say about plans to tackle high prices -- with many fearing higher borrowing costs could send the world’s biggest economy into recession in its battle to rein in inflation.
The euro held close to a two-decade low against the dollar, and the greenback struck a two-year peak against China’s yuan.
Oil extended gains on hopes of an OPEC output cut, while gas prices remain elevated on Russian supply tensions.
Losing momentum
“Markets seem to have lost their momentum,” noted AJ Bell investment director Russ Mould.
“Investors have become nervous once again, with all eyes on Powell and what he says this coming Friday.”
Central banks face a delicate balancing act between battling inflation, with Russia’s war in Ukraine sending energy prices soaring, and avoiding recession.
Yet concerns are growing that spiking energy costs could still prompt a worldwide downturn.
“Investor anxiety is growing that a combination of central banks raising rates and higher energy prices will tip the global economy into a long recession,” said CMC Markets analyst Michael Hewson. Wall Street ended mostly lower Tuesday, and key markets in Asia followed suit Wednesday.
Rollercoaster ride
The foreign exchange market has faced a rollercoaster ride so far this week.
The euro tumbled on Tuesday to $0.9901 -- a new two-decade low -- but later clawed back losses as the greenback was hit by poor US economic data.
The dollar had strengthened this week ahead Powell’s speech, as markets speculate that the Fed will continue to tighten its monetary policy.
Higher interest rates boost the American currency as they make dollar-denominated debt more attractive to investors.
But the euro also has been weighed down by a gloomy outlook for the eurozone economy amid fears of a halt to Russia’s gas deliveries.
