Rising geopolitical tensions surrounding Ukraine added to investor concerns
The US stock market dropped overnight ahead of Wednesday’s interest-rate decision from the Federal Reserve as the central bank is expected to announce a 0.75% rate hike. Adding to the downside pressure surrounding equities, the yield on the 10-year Treasury briefly exceeded 3.6% to register more than ten-year highs. The Dow Jones Industrial Average shed 1.01%, the S&P 500 slid 1.13% and the Nasdaq Composite slumped 0.95%. On the data front, housing starts jumped in August while building permits saw the biggest decline since April 2020.
Asian stocks mostly fell on Wednesday as investors looked ahead to an interest rate hike by the Fed. Rising geopolitical tensions surrounding Ukraine added to investor concerns as officials in four Russian-controlled regions in eastern and southern Ukraine have said they will hold referendums on becoming part of Russia. The move could escalate the conflict further. As such, Japan’s benchmark Nikkei 225 dipped 1.36%, Australia’s S&P/ASX 200 dropped 1.56%, while the Shanghai Composite slipped 0.17%.
Similarly, European equities opened lower on Wednesday, with the pan-European Stoxx 600 falling 0.4% in early trade. Risk aversion intensified after Russian President Vladimir Putin announced a partial military mobilization in Russia. Further developments on this front could add to investor worries down the road, with US stock index futures losing ground as well.
Meanwhile, the US dollar rallied to fresh multi-year highs just below the 111.00 mark before retreating marginally in recent trading. The safe-haven demand added to dollar’s strength ahead of the Fed’s crucial decision. A hawkish hike could push the greenback to fresh long-term tops later in the day, with the 111.00 level in focus. Against this backdrop, EURUSD extended the plunge from yesterday when the pair fell back below the 20-DMA. The euro has settle around 0.9900 in early European trading, shedding 0.60% on the day.