Powell underscored the long road to economic recovery ahead
Wall Street stocks closed sharply lower yesterday, leaving the Dow and S&P 500 negative for this year after Federal Reserve Chairman Jerome Powell underscored the long road to economic recovery ahead. Furthermore, Wednesday marked the worst day for all three major indexes since late October. In particular, the Dow Jones Industrial Average shed over 2%, the S&P 500 lost 2.57%, while the Nasdaq Composite fell 2.61%.
Today in Asia, stocks followed Wall Street’s plunge amid deepening concerns about stretched valuations in stock markets. Besides, vaccine rollouts have not progressed in Asia as quickly as they have in the West, with outbreaks persisting and have grown in some countries. As a result, Japan’s benchmark Nikkei 225 fell 1.53% and Australia’s S&P/ASX 200 slipped nearly 2.0%. Hong Kong’s Hang Seng dropped 2.25%, while the Shanghai Composite shed 1.79%.
As risk sentiment turned to the worse, the safe-haven dollar demand picked up on Wednesday, sending the US currency higher across the board. As a result, EURUSD briefly dipped to 1.5-week lows around 1.2060 before bouncing slightly above 1.2100. The common currency suffered losses as risk aversion in stock markets overshadowed the dovish Federal Reserve and kept the greenback stronger. Fourth-quarter GDP and weekly jobless claims from the U.S will be in focus later today.
Elsewhere, oil prices dipped amid dollar strength while staying above the 20-DMA. Earlier in the day, Brent crude briefly jumped after the Energy Information Administration reported a crude oil inventory draw of 9.9 million barrels for the week to January 22. However, the futures failed to preserve gains and retreated below $55 as risk sentiment deteriorated across the board. Today, oil prices have settled marginally above this level, trying to hold above the mentioned moving average, a break below which could attract more intense selling pressure.