The central bank governor indicated that an interest rate hike was still being considered this year
Fed Chair Powell in a speech Thursday signaled an extended pause in rate hikes but said he didn’t see rates as too high. Against this backdrop, Wall Street stocks fell overnight, pressured by another rally in the US Treasury yields. Investors were also unnerved by the ongoing conflict in the Middle East. The Dow Jones Industrial Average shed 0.75%, the S&P 500 dropped 0.85%, while the Nasdaq Composite finished 0.96% lower. In individual stocks, Netflix shares jumped after the company said it added nearly 9 million net new paid subscribers last quarter, the biggest jump since early 2020.
In Asia, equities were lower on Friday, extending steep losses amid the renewed rout in global bond markets after Powell indicated that an interest rate hike was still being considered this year, especially as recent data pointed to stickiness in inflation. The Nikkei 225 index sank 0.52%, losing more than 3% on a weekly basis after fresh data showed that Japanese inflation grew more than expected last month. In China, the Shanghai Composite index fell 0.74% to settle around a one-week low after the country’s central bank kept its benchmark loan prime rate on hold, as expected.
European stocks opened in negative territory ahead of the weekend to fall to a seven-month low as investors continued to digest comments from Powell who said the central bank would be resolute in its commitment to its 2% mandate. The pan-European Stoxx 600 index gave up 0.7% in early deals, with oil and gas bucking the trend, witnessing modest gains. US stock index futures have also fell to near the lows for the day as investors brace for more uncertainty amid the ongoing Israel-Hamas conflict.
Meanwhile, the US dollar turned slightly positive amid risk aversion that dominates global financial markets today. The USD index has settled above the 106.00 figure, targeting the 106.50 immediate resistance, followed by the 106.70 zone that capped the ascent earlier in the week. Should the buying pressure keep building in the near term, the greenback may challenge this barrier next week. As dollar demand reemerged, the EURUSD pair came off yesterday’s highs seen above the 1.0600 figure. The shared currency has settled around 1.0570, holding above the descending 20-DMA so far. A failure to regain 1.0600 in the near term may bring the euro under more intense selling pressure.