Markets fall again as Fed hikes rates, warns of more pain to come Pipa News


Markets fall again as Fed hikes rates, warns of more pain to come

LONDON: European stocks fell on Thursday after heavy losses in Asia and Wall Street, but the dollar rose after the Federal Reserve signaled more US interest rates hike.

Equities fell after the US central bank warned of more pain to come, as it unveiled a third straight jumbo rate hike on Wednesday to tackle decades of high inflation.

The British pound briefly hit a new 37-year low at $1.1212, even as the Bank of England prepared to announce a second consecutive bumper rate hike later on Thursday.

The greenback also rose to a 24-year high of 145.90 yen, prompting the Bank of Japan to launch a rare intervention to protect its currency. The euro closed at a 20-year low.

pricing in recession

“Share prices are falling, the dollar is rising, and the bond market is pricing in a downturn as the US Federal Reserve keeps monetary policy tighter and makes a pivot or even a turn in its newfound enthusiasm for the fight. That eliminates any hope for a break in inflation,” said Russ Mold, investment director at AJ Bell.

“Fed Chairman Jerome Powell … said there was no painless way to get inflation under control,” he said.

The world’s major central banks are rushing to raise rates to cushion red-hot global consumer prices, but traders fear rising borrowing costs will trigger a recession.

European stocks recover from geopolitical shock ahead of Fed’s big move

Switzerland and Norway hiked interest rates sharply on Thursday, reflecting the big increases this week in Sweden and the United States.

In Asia, Indonesia and the Philippines also tightened monetary policy but the BoJ abandoned the status quo.

While the Fed’s 0.75-percentage-point increase was widely expected, there was some surprise at the central bank’s forecast that borrowing costs are likely to remain above four percent over the course of the next year.

Powell reiterated his determination to focus on reducing inflation — which is at a four-decade high — and acknowledged the campaign would hit Americans hard.

No ‘Painless Way’

Powell said after the verdict, ‘We have to leave inflation behind.

“I wish there was a painless way to do this. There isn’t.”

He added that “the historical record strongly warns against premature lax policy” and that the Fed will “maintain it until the job is done”.

In response, Wall Street fell as traders contemplated an era of high-long rates, which could affect companies’ bottom lines.

Asia followed suit, with Hong Kong hitting an 11-year low – while Tokyo, Shanghai, Seoul, Singapore, Mumbai, Taipei and Manila were also down.

The Fed has for months tried to walk a fine line between fighting rising prices and trying to contract the economy, but officials acknowledge that the chances of success are slim.

“With the new rate projections, the Fed is engineering a hard landing — a soft landing is almost out of the question,” said Seema Shah, Principal Global Investors.

Commentators are now betting on a fourth straight 75-basis-point rate hike at the next Fed meeting in November.

Oil prices rose in recent gains after Russian President Vladimir Putin announced a partial mobilization of the Russian military and a threat to use nuclear weapons against the West.

Around 1015 GMT . key figures on

LONDON – FTSE 100: down 0.4 percent to 7,211.71 points

Frankfurt – DAX: down 0.7 percent to 12,680.86 . Feather

Paris – CAC 40: down 0.8 percent to 5,985.64

EUR STOXX 50: down 0.7 percent to 3,468.83 . Feather

Tokyo – Nikkei 225: down 0.6 percent to 27,153,83 (close)

Hong Kong – Hang Seng Index: down 1.6 percent at 18,147.95 (close to)

Shanghai – overall: down 0.3 percent at 3,108.91 (close to)

New York – Dow: down 1.7 percent at 30,183.78 (close to)

Pound/Dollar: UP $1.1332 at $1.1270 from Wednesday

EUR/dollar: UP $0.9837 to $0.9837 . Feather

Euro/Pound: down from 87.29 pence to 87.14 pence

Dollar/yen: down from 144.06 yen to 142.50 yen

Brent North Sea crude: UP 1.0 percent up at $90.76 per barrel

West Texas Intermediate: UP 1.2 percent to $83.89 per barrel