The excitement that had given Wall Street its best day in more than a month on Tuesday suddenly vanished as Europe opened 1.5% lower and Brent crude fell 4% after an incredible Asian session. The dollar’s scorching bulls did not even capture the bets that Federal Reserve chief Jay Powell would later reiterate in Washington the need to raise US interest rates hard and fast. Sign up now for FREE unlimited access to Reuters.com Register In addition to the yen, the euro fell 0.3%, Norway’s oil-sensitive crown fell 1.3% and the British pound fell 0.7% as data confirmed that inflation is now at a high of 40%. years of 9.1%. read more “It’s remarkable how quickly the market plummeted again after this slight squeezing of the climate yesterday,” said Saxo Bank FX general John Hardy. “The commodity market seems to be calling for a (global) recession,” he added. “And the dollar is turning to power as a safe haven.” These concerns about the recession were also reflected in bond markets where US and German government bond yields fell as traders sought traditional safe havens. The yield on US 10-year benchmark bonds fell to 3.233%, while Germany’s 10-year yield fell 7 basis points (bps) to 1.692%, having reached its highest level since January 2014 at 1.928% last week. But the spread between Germany and heavily indebted Italy widened again. Foreign Minister Luigi Di Maio has said he is leaving the Five Star Movement to form a new parliamentary group that will support the government, a move that threatens to bring new instability to Prime Minister Mario Draghi’s coalition. read more Overnight, the broader Asia-Pacific MSCI stock index outside Japan (.MIAPJ0000PUS) fell 2.3% to near a five-week low. Hong Kong-based heavyweight technology companies plunged more than 4% (.HSTECH) although Tokyo’s Nikkei (.N225) managed to maintain its losses at just 0.4%. Investors continue to assess how much they should worry about central banks pushing the global economy into recession as they try to curb hot inflation with interest rate hikes. Major US stock indexes rose 2% overnight as the economic outlook is unlikely to be as tragic as we thought during trading last week, when the S&P 500 (.SPX) hit a weekly high. its percentage fall from March 2020. However, the rise in Wall Street did not seem to last even with the futures contracts of the S&P 500 and the Nasdaq, which fell almost 1% on Wednesday. “I think this recent post-holiday market rally reflects investor uncertainty about whether or not we have seen the Fed peak and inflation aggression – I think we are close,” Invesco’s strategic analyst told the world market. Asia-Pacific David Chao. US Federal Reserve Chairman Jerome Powell is due to begin his deposition in Congress on Wednesday, with investors seeking further information on whether another 75-unit rate hike is expected in July. Economists polled by Reuters expect the Fed to raise interest rates by 75 basis points next month, following a rise of half a percentage point in September and not falling by a quarter of a percentage point until November. earlier. read more Most other global central banks are in a similar situation, with the exception of the Bank of Japan, which last week pledged to maintain its policy of extremely low interest rates. By contrast, the Czech central bank was expected to raise interest rates by 125 bps later with double-digit inflation. This gap between low interest rates in Japan and rising US interest rates has weighed on the yen, which hit a new 24-year low of $ 136.71 per trade in Asia before moving more steadily to 136.20. Minutes from the Bank of Japan policy meeting in April published on Wednesday showed the central bank’s concerns about the impact that the sharp fall of the currency could have on the country’s business environment. read more The other big move was in commodity markets. The 4% drop in oil prices came amid worries about the recession, with US President Joe Biden expected to call for a temporary suspension of the federal tax on gasoline at 18.4 cents a gallon on Wednesday, a source told Reuters. for the design. Brent fell $ 5 to $ 109.79 a barrel, while US crude fell 5.9% or $ 5.37 to $ 104.15. “The latest in a long series of attempts to mitigate rising pump prices is having the desired effect. However, if this spasmodic reaction withstands the test of time is by no means guaranteed,” said Stephen Brennock of PVM. rise in demand in the summer. Sign up now for FREE unlimited access to Reuters.com Register Additional references by Sam Byford in Tokyo and Shadia Nasralla in Bengaluru Our role models: The Thomson Reuters Trust Principles.
