Alun John’s outlook for the day ahead in European and worldwide markets
The equity markets have finally begun to pay attention to central bank policymakers, who are increasingly singing from the same hymn sheet, but the melody does not please the markets.
Related: The Russian rouble falls as the central bank cuts interest rates to 11%
Fed Chair Jerome Powell said on Friday that the U.S. central bank will keep raising interest rates to fight inflation, even though this hurts businesses and consumers.
Isabel Schnabel, a member of the board of directors of the European Central Bank, said on Saturday that central banks around the world risk losing public trust and must now move aggressively to combat inflation, even if it pushes their economies into recession.
On Monday morning, Asian stocks fell nearly 2%; Nasdaq futures were down 1.22% despite the tech-heavy index losing nearly 4% on Friday; and Euro Stoxx 50 futures were down 1.5%.
The reaction was a little different from what happened when Powell made a series of public comments earlier this summer, which the markets took to mean that the Fed might start to worry about the risk of a recession. This made stock prices go up.
Related: Goldman Sachs says there’s a 50% possibility Chinese equities will leave the U.S.
Asia’s markets were active on Monday. The dollar rose as U.S. yields increased, especially at the shorter end, as a result. [US/] [FRX/]
The dollar gained ground against the Japanese yen, which rose 0.83 percent, and the Chinese yuan, which broke through the critical 6.9 per dollar level.
This wasn’t a surprise, since the Bank of Japan and the People’s Bank of China are the only major central banks that are still using monetary easing.
There is relatively little on Monday’s schedule to compete with the central bankers’ speeches.
Goldman Sachs’ (NYSE:GS) recent research projecting that the United Kingdom will enter a recession in the fourth quarter will not make for pleasant park bench reading for investors.
Related: Stocks eye highest month since late 2020, dollar recovers
Monday’s key market-moving events include the following:
London’s markets were closed for a national holiday.
EU defence ministers will meet on August 30.
