Sydney, Sep 1 (BNA): Asian stocks tumbled and the dollar rose as investors greeted September by selling off everything that wasn’t done after a month of worry about aggressive rate hikes from global policy makers.
The sell-off looks set to hit European markets, with Eurozone Stoxx 50 futures down 0.9%, German DAX futures down 0.86%, and FTSE futures down 0.64%. S&P 500 futures were down 0.7%, while Nasdaq futures were down 1.2%.
Both the US Federal Reserve and the European Central Bank are expected to aggressively raise borrowing costs, Reuters reports.
Overnight data showed that euro zone inflation rose to another record high last month, cementing the case for a 75 basis point interest rate hike from the European Central Bank next week.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.6% to a six-week low, as risk sentiment took a turn for the worse.
Japan’s Nikkei fell 1.7% and Hong Kong’s Hang Seng fell 1.5% while Chinese blue-chip holders gained 0.1%, buoyed by hopes of more economic stimulus from Beijing.
“August has been an awful month for balanced fund investors with no diversified gains from holding a portfolio of stocks and bonds,” said Rodrigo Cattrell, Senior FX Analyst at National Australia Bank.
“The end of the month did not produce surprises, but rather an extension of the main themes seen during August with further increases in core global bond yields and weaker equities.”
The US central bank will need to raise interest rates somewhat above 4% by early next year and keep them there in order to bring inflation back to the Fed’s target, said Loretta Meester, president of the Federal Reserve Bank of Cleveland, and that the risks of a recession over the next year or two. have ascended.
US stocks ended the month with their worst August performance in seven years. For the month, the Dow Jones Industrial Average is down 4.06%, the S&P 500 is down 4.24%, and the Nasdaq is down 4.64%.
Markets are awaiting Friday’s US non-farm payroll data and may not want a strong number if it supports the basis for continued sharp interest rate hikes, which could boost the US dollar.
“What we are saying to our customers and stakeholders is that we should be watching the labor market… If the labor market starts to weaken, that is a sign that consumer sentiment is starting to weaken and this is a very strong indication that we are likely to enter a recession scenario,” said Paul Gruenwald, chief economist. Global Ratings in S&P Global Ratings.
In the currency markets, the dollar advanced 0.4% against the Japanese yen to a 24-year high of 139.5 as investors braced for higher rates in the US while expecting the Japanese fixed rates to go nowhere soon.
The euro and sterling were also down 0.4% against the dollar.
The Fed’s hawkish outlook has pushed Treasury yields to new highs.
The yield on the standard two-year bond jumped 6 basis points to its highest level since late 2007, at 3.51%, while the yield on the 10-year note rose 6 basis points to 3.20%.
US crude fell 0.4 percent to $89.2 a barrel, while Brent crude fell 0.4 percent to $95.31 a barrel.
Gold was a little lower.
Spot gold was trading at $1703.9 an ounce.
ZHB