Fed governor kept the door open for a 75-basis-point interest-rate hike in September
Stocks plunged on Friday after Federal Reserve Chair Jerome Powell reiterated a tough stance against inflation, suggesting higher interest rates will be kept in place for a longer time. Furthermore, Powell kept the door open for a 75-basis-point interest-rate hike in September, even if the next inflation report is softer than feared. Amid a broad-based sell-off, the Dow Jones dropped 3.03%, the S&P 500 fell 3.37%, and the Nasdaq Composite slid 3.94%.
Asian equities fell on Monday as the US central bank showed that the monetary authorities had no intention of slowing its pace of interest rate hikes. The regional markets approached a two-year low reached mid-July as risk aversion persisted at the start of the week. The MSCI Asia Pacific Index slumped as much as 2.3%, the most in more than two months. In individual stocks, shares of Fortescue the gave up over 4% after the world’s fourth-largest iron ore producer revealed a 40% fall in its annual profit.
In Europe, stocks opened lower to start the day, mirroring the negative tones from US futures, with S&P 500 futures seen down 0.6%in early pre-market deals. The risk mood stays on the defensive at the start of the new week as investors need some time to digest the Fed’s hawkish message. The market focus now turns to US payrolls data due later in the week. Germany’s DAX 30 index fell over 1%, France’s CAC 40 dipped around 1.25%, while Italy’s FTSE MIB fell around 1%. UK markets are closed on Monday for a bank holiday.
As Powell delivered a more hawkish speech than expected, the US dollar surged across the market on Friday, extending the ascent today. Earlier on Monday, the USD index advanced to fresh twenty-year highs around 109.50 before retreating marginally amid some profit-taking. EURUSD briefly peaked just below the 1.0100 mark to finish around 0.9965 ahead of the weekend. The euro remains under pressure on Monday, struggling amid a stronger dollar, albeit refraining from posting fresh multi-year lows so far.