The central bank dented hopes interest rate hikes are finished
US stocks retreated on Wednesday as investors digested the minutes of the Federal Reserve’s July meeting, which contained a hawkish bias, pointing to potentially higher rates. In particular, the central bank officials said additional tightening may be necessary to bring down inflation. The Dow Jones dropped 0.52%, the S&P 500 dipped 0.76%, and the Nasdaq Composite declined 1.15%. in individual stocks, Intel gave up more than 3% after the chipmaker’s deal to purchase Tower Semiconductor Ltd. fell apart.
Asian equities followed Wall Street lower on Thursday to hit nine-month lows after the Fed dented hopes interest rate hikes are finished. Persisting fears over China’s sluggish economic recovery added to a more downbeat tone among investors. MSCI’s broadest index of Asia-Pacific shares outside Japan was down more than 1%. The index gave up 8% so far this month and set for its worst monthly performance in nearly a year. Japan’s Nikkei and Australia’s S&P/ASX 200 indexes were down 1%, while the Hong Kong’s Hang Seng Index fell 1.7% and was at near nine-month lows before bouncing.
In Europe, stocks opened lower as well, with market participants assessing the Fed’s hawkish tone in the minutes. Also, as bond yields continue to climb, it is weighing on the overall risk mood. The pan-European Stoxx 600 index dropped 0.5% in early deals. Meanwhile, US stock index futures are up marginally by 0.1% now. Investors will focus on fresh corporate earnings later in the day, with retailers Walmart and Tapestry set to report before the opening bell.
The greenback briefly climbed to 103.60 for the first time since June before retreating marginally. The overall sentiment surrounding the US dollar has been upbeat for more than a month already as the currency is well supported by a combination of higher Treasury yields, robust economic data and still elevated inflation numbers, suggesting the Fed could raise rates further. On the upside, the next major target arrives at 104.00, while the key near-term support is expected in the 103.20-103.00 zone.