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Asian stocks open lower as everyone looks to Fed decision next week

Wall Street in New York is synonymous with US financial markets. — © Digital magazine

Asian markets fell at the open on Friday, following losses on Wall Street, as investors continue to worry about persistently high global inflation and the possibility of further interest rate hikes.

Major markets in Tokyo, Shanghai, Hong Kong and Sydney opened lower in line with general market sentiment ahead of the US Federal Reserve’s decision next week.

Asian equities look set to continue their weekly decline for the fifth week in a row after continued weakness in US and European equities.

Wall Street’s three major indexes rose briefly on Thursday, but that gain fizzled out as traders took little comfort from US President Joe Biden’s announcement of a tentative agreement to avert a potentially devastating railroad strike.

On Thursday, the broad-based S&P 500 index fell 1.1%, the London index rose by less than a tenth of a percent, but both the Frankfurt and Paris indexes fell.

Nasdaq was hit particularly hard by Adobe, whose stock plunged 16.9% after it agreed to acquire Figma, an online collaborative design platform, for $20 billion in cash and stock.

All eyes are on the Fed, which has already made two consecutive 75 basis point rate hikes and is expected to make a third.

On Thursday, US retail sales showed an unexpected rise in August, but the report also lowered the previous month’s sales, softening the good news.

US weekly jobless claims fell again, and industrial production fell slightly in August.

However, the new data was not enough to offset the widespread bearish sentiment following higher-than-expected US inflation data released earlier in the week, which showed yearly inflation slowed less than forecast and monthly inflation rose.

– Fed expectations –

Analysts expect the Fed to continue raising interest rates in an attempt to cool an overheated economy and fight sky-high inflation that remains close to ten-year highs in major economies.

“Due to the sharp rise in Treasury yields, the Fed will have to keep raising rates after (next week),” noted investor Louis Navelier said on his podcast on Thursday.

“I think they could now raise rates in November, just before the midterms (in the US) and possibly in December.”

Major markets in Tokyo, Shanghai, Hong Kong and Sydney opened lower in line with general market sentiment ahead of the US Fed’s decision – Copyright AFP Jim WATSON

Other commentators echoed the view, with OANDA senior market analyst Edward Moya voicing concern that further increases could send the world’s largest economy into recession.

“The latest data suggests the Fed may stick with aggressive rate hikes as the labor market remains strong and the economy slowly softens,” he said.

“Risks are rising that the Fed will send the economy into a severe recession, but the data does not support that argument right now.”

Now that the data is out, markets are fully focused on the Fed’s decision as the next potential turnaround, said Fiona Chincotta, senior financial markets analyst at City Index.

“This is a market waiting for the next catalyst,” she told Bloomberg News.

“What we saw in Tuesday’s selloff is a reassessment of the Fed’s expectations. Until we really hear from the Fed, we won’t get a very clear direction.”

– Key figures around 02:30 GMT –

Tokyo – Nikkei 225: DOWN 1.1% to 27,567.75.

Hong Kong – Hang Seng Index: DOWN 0.7% to 18,798.57.

Shanghai – Composite: DOWN 0.9% to 3169.73.

New York-Dow: DOWN 0.6% to 30,961.82 (close)

London – FTSE 100: DOWN less than 0.1% to 7,274.08 (close)

EUR/USD: DOWN $0.9995 from $0.9997.

Pound/Dollar: DOWN $1.1461 from $1.1472.

Euro/pound: to 87.22 pence from 87.14 pence.

Dollar/yen: DOWN to 143.29 yen from 143.45 yen.

Brent North Sea oil: up 0.3% to $91.13 per barrel

West Texas Intermediate: up 0.3% to $85.33 per barrel

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