Asian stocks fell on Monday as the prospect of more aggressive rate rises in the United States and Europe pushed bond rates and the dollar higher, putting market and earning values to the test.
The promise of policy “pain” to curb inflation by Federal Reserve Chair Jerome Powell dashed hopes that the reserve bank would once again come to the rescue of markets.
Also Read| Week in review: Sensex, Nifty fall on profit booking
Isabel Schnabel, a member of the European Central Bank board (ECB), delivered a message over the weekend, warning that the federal reserve must now act decisively to battle inflation, even if doing so sends their economy into recession, reported Reuters.
Euribor futures fell sharply as markets factored in the possibility of an ECB rate rise of 75 basis points next month.
Also Read| Week ahead: GDP data, rupee movement to weigh on Sensex, Nifty
Futures are currently putting in a 64% possibility that the Fed will raise interest rates by 75 basis points in September, with rates peaking in the 3.75%-4.0% area.
This Friday’s release of the August payroll numbers, which experts expect to show a slight increase of 285,000 following July’s record-breaking surge of 528,000, might have a significant impact.
Also Read| Jackson Hole Symposium 2022: Economists react to Fed chair Powell’s speech
The hawkish message did not go down well with Wall Street, as S&P 500 futures were down 1.1% after falling almost 3.4% on Friday. Nasdaq futures fell 1.5% as the forecast for weaker economic growth weighed on tech firms.
The MSCI Asia Pacific Index (excluding Japan) lost 1.9%. The Nikkei in Japan fell 2.8%, while the KOSPI in South Korea fell 2.3%.
Also Read| Xiaomi in talks with BAIC to produce electric vehicles: report
Following the ECB’s rate warnings, Chinese blue chips fell 0.6%, while EUROSTOXX 50 futures fell 1.7%.
Oil prices rose on predictions that OPEC+ may decrease supply at their meeting on September 5. Brent gained 58 cents to $101.57 per barrel, while US crude gained 87 cents to $93.93 per barrel.
