Most Asian markets joined a global sell-off Thursday on fresh worries that the Federal Reserve would hike interest rates again, while China's economic woes continued to shred traders' nerves.
While minutes from the US central bank's July meeting showed two decision-makers were against lifting borrowing costs, they also revealed that "most participants" saw a significant risk that price increases would persist and could require further monetary tightening.
The remarks dealt a blow to investors who had hoped rates were now at their peak following a string of data indicating inflation was falling and the jobs market softening.
And there also remains debate inside the Fed about the next move, with officials giving sharply differing views, though the bank has said it will make decisions based on incoming data.
Futures traders assign a probability of close to 90 percent that the Fed will stand pat at its September meeting, according to data from CME Group, though there is a growing belief that more hikes are coming down the line.
All three main indexes on Wall Street sank, with tech firms -- which are susceptible to higher rates -- acting as a major drag, while 10-year Treasury yields hit their highest level since 2008 at the height of the global financial crisis.
"The Fed has no choice but to keep it up until they are convinced that inflationary expectations are quashed," said Steve Sosnick of Interactive Brokers.
"Doing otherwise risks some of the embers reigniting. Even though two governors favoured keeping rates steady in July, it is important to keep in mind that a pause is not a pivot."
The dour mood in New York and Europe filtered through to Asia, where most major markets were deep in the red.
However, Hong Kong was flat and Shanghai saw small gains thanks to bargain-buying after a run of losses.
London, Paris and Frankfurt also retreated.
Bets on further hikes have pushed the dollar to an eight-month high versus the yen, raising the prospect of Japanese authorities intervening to support their currency.
The selling was intensified by worries about China as authorities struggle to revive a stuttering post-Covid recovery.
Fresh figures on Wednesday pointed to a second month of falling new home prices in China, underscoring deep problems in the property sector that observers fear could spill over into the domestic and global economy.
That came a day after news that growth in retail sales and industrial production had slowed.
Leaders this week pledged to boost consumption at home and lift the private sector, though there were no details. Similarly, promises of help for the property sector and other key areas of the economy have not been followed up with anything concrete.
"Investors looking for more aggressive support from policy makers amid soft activity have been disappointed as the recent incremental measures haven't been sufficient to restore confidence," said Taylor Nugent at National Australia Bank.
US officials have also raised concerns about a possible spillover of China's troubles, with Deputy Treasury Secretary Wally Adeyemo saying they were proving to be "a headwind -- not just to the US economy, but to the global economy".
That came after Treasury Secretary Janet Yellen said on Monday that Beijing's issues were a "risk factor" for the United States.
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: DOWN 0.4 percent at 31,626.00 (close)
Hong Kong - Hang Seng In
dex: FLAT at 18,326.63 (close)
Shanghai - Composite: UP 0.4 percent at 3,163.74 (close)
London - FTSE 100: DOWN 0.5 percent at 7,321.81
Euro/dollar: UP at $1.0882 from $1.0880 on Wednesday
Pound/dollar: UP at $1.2739 from $1.2725
Euro/pound: DOWN at 85.42 pence from 85.48 pence
Dollar/yen: UP at 146.34 from 146.33 yen
West Texas Intermediate: UP 0.6 percent at $79.84 per barrel
Brent North Sea crude: UP 0.6 percent at $83.92 per barrel
New York - Dow: DOWN 0.5 percent at 34,765.74 (close)
Artificial Intelligence Analysis
Defense Industry Analyst: 6Stock Market Analyst: 8General Industry Analyst: 7Analyst Summary
: This article outlines the impact of the Federal Reserves recent interest rate decision on global markets. The minutes from the July meeting revealed that most participants felt a significant risk of further price increases, which sent stocks and bond yields tumbling across the world. This decision has caused debate inside the Fed about the next move, with officials providing sharply differing views. Futures traders have assigned a probability of close to 90 percent that the Fed will stand pat at its September meeting. Most Asian markets joined a global sell-off on Thursday, with tech firms being particularly affected. Hong Kong and Shanghai saw some small gains due to bargain buying after a run of losses. London, Paris, and Frankfurt also retreated. The Federal Reserves interest rate decision has had a considerable impact on the global markets, and the effects of this decision will likely be felt for some time. This decision is in stark contrast to the trend over the past 25 years, which has seen a reduction in interest rates, leading to increased economic growth. This decision also comes at a time when the Chinese economy is in trouble, adding to the tension in the markets. Questions to Consider:
- 1. How will the Federal Reserves decision to raise interest rates affect the global economy in the short and long term?
- 2. What other factors have contributed to the recent market volatility?
- 3.
What are the implications of this decision for the defense industry? 4. How will this decision impact the stock market going forward?
5. What strategies can investors use to mitigate the effects of this decision?
This AI report is generated by a sophisticated prompt to a ChatGPT API. Our editors clean text for presentation, but preserve AI thought for our collective observation. Please comment and ask questions about AI use by Spacedaily. We appreciate your support and contribution to better trade news.
