Stocks tumble on US rate hike uncertainty
NYSE - LSE
Stocks tumble on US rate hike uncertainty
Equity markets mostly retreated Thursday, with the sharpest losses in Asia, after Federal Reserve chief Jerome Powell refused to be drawn on the pace of US interest rate hikes to battle decades-high inflation.
Although Powell on Wednesday firmed market expectations of a rate increase in March, investors were spooked by what happens thereafter.
His reluctance to give clear guidance on further tightening helped the dollar to reach a two-month high against the euro Thursday.
"Federal Reserve chair Jay Powell failed to stop the market rout with the central bank's latest policy update, with US stocks falling further after the announcement and the equity sell-off extending to most of Asia and Europe on Thursday," said AJ Bell investment director Russ Mould.
"It's what he didn't say that troubled investors. The key concerns are how aggressive the Fed will be with raising rates -- will they go up at every meeting this year, and will they go up by more than 0.25 percentage points each time?"
Fed officials still believe the price rises will be brought under control as economies reopen and supply chain problems abate, but the need to prevent them from running away is forcing them into an aggressive pivot.
The meeting "played out more hawkishly than we expected", said Steven Englander at Standard Chartered Bank.
"The (policy board) statement was largely as anticipated, but... Powell emphasised upside risks to inflation, pointing to a steady pace of policy withdrawal."
Powell's comments sent Wall Street sharply lower from their intra-day levels with tech firms, which are more susceptible to higher borrowing costs, taking the brunt.
Sharp Asian losses followed, particularly among tech stocks.
Seoul tanked more than three percent into a bear market -- a 20 percent drop from its recent high hit in August -- while Sydney fell into a correction, having given up 10 percent from its latest peak.
Tokyo took a 3.1-percent pounding as market heavyweights Sony and SoftBank -- which invests heavily in the tech sector -- led losses, while Hong Kong was two percent off.
Europe was mixed, with gains for London, Milan and Madrid, while Frankfurt and Paris fell in midday deals awaiting the Wall Street open.
- Oil below $90 -
Elsewhere, oil prices steadied, a day after benchmark European contract Brent North Sea briefly broke $90 per barrel for the first time in seven years owing to rising Ukraine-Russia tensions and falling US crude stockpiles.
Eyes are on the upcoming meeting of OPEC and other key producers, where they will discuss plans to continue to increase output.
"Energy traders are anticipating higher energy prices on potential geopolitical risks and as OPEC+ will stick to their plan to deliver another modest increase to production at next week's meeting," said OANDA's Edward Moya.
- Key figures around 1145 GMT -
London - FTSE 100: UP 0.5 percent at 7,504.16 points
Paris - CAC 40: DOWN 0.2 percent at 6,971.66
Frankfurt - DAX: DOWN 0.5 percent at 15,389.22
EURO STOXX 50: DOWN 0.3 percent at 4,150.27
Tokyo - Nikkei 225: DOWN 3.1 percent at 26,170.30 (close)
Hong Kong - Hang Seng Index: DOWN 2.0 percent at 23,807.00 (close)
Shanghai - Composite: DOWN 1.8 percent at 3,394.25 (close)
New York - Dow: DOWN 0.4 percent at 34,168.09 (close)
Euro/dollar: DOWN at $1.1188 from $1.1238 late Wednesday
Pound/dollar: DOWN at $1.3403 from $1.3458
Euro/pound: UP at 83.47 pence from 83.45 pence
Dollar/yen: UP at 115.18 yen from 114.64 yen
Brent North Sea crude: UP 0.2 percent at $88.89 per barrel
West Texas Intermediate: UP 0.1 percent at $87.39 per barrel
J.Berger--HHA
