Fed’s Powell doesn’t rule out a rate hike every meeting this year
US stocks erased early gains after Jerome Powell signaled the Federal Reserve will steadily remove support for the economy amid stubbornly high inflation. The central bank chief said he backs a March rate-hike and won’t rule out a rate hike every meeting. In its statement, the central bank signaled it expects a balance-sheet reduction to start afterward. As such, the S&P 500 fell just 0.1%, the Dow Jones Industrial Average shed 0.4%, while the Nasdaq rose less than 0.1% to finish nearly unchanged. After the closing bell, the pressure intensified, however. Futures tied to the Dow declined nearly 1% while S&P 500 futures and Nasdaq 100 futures slipped 1.12% and 1.36%, respectively.
Asian stock markets declined across the board on Thursday as investors digested the U.S. Federal Reserve’s policy decision. The Shanghai Composite in China shed 1.5%, Japan’s Nikkei 225 lost over 3%, while the MSCI’s index of Asia-Pacific shares outside Japan dropped 2.0%. Geopolitical concerns surrounding Russia added to the Fed-led risk-aversion wave in the markets. Adding to the pressure in the region, Evergrande struggles to make coupon payments and eyes for debt restructuring.
In Europe, equity markets opened sharply lower today as investors react to the Fed decision, with the pan-European Stoxx 600 dropping 1% in early trade. On the data front, Germany’s GfK consumer sentiment index arrived at -6.7 points heading into February, exceeding expectations for a drop to -7.8. In individual stocks, Deutsche Bank gained more than 4% after posting better-than-expected earnings for the fourth quarter of 2021.
Meanwhile, the safe-haven dollar stays elevated after a rally seen on Monday amid widespread risk aversion. The greenback received a boost from the Fed after the central bank concluded its two-day meeting and signaled it would hike rates to fight persistent inflation. The benchmark 10-year Treasury yield climbed above 1.8% following the outcome of the meeting. As such, EURUSD plunged back below the 1.1300 figure and extended losses to two-month lows below the 1.1200 figure on Thursday. The pair now looks oversold but strong bearish momentum indicates that the euro could weaken further in the short term and target the 2021 low near 1.1185.
