LONDON: Stock markets mainly dropped on Friday, with investors focused firmly on the outlook for interest rate hikes as central banks battle to bring down sky-high inflation.
The dollar rose against main rivals, while oil prices slid as traders assessed the risk of a possible global recession.
European gas prices pushed higher after a record-close on Thursday as the Ukraine war impacts supplies.
Elsewhere, bitcoin slumped more than eight percent as investors shunned risky assets.
A two-month equity markets rally from June lows appears to have run out of steam.
“Stocks will most likely struggle for direction for the rest of the summer as Wall Street is still uncertain with how aggressive the Fed will be in September,” said OANDA trading platform analyst Edward Moya.
Patrick O’Hare, analyst at Briefing.com, said the recent rally has been driven by the market “embracing a belief that the Fed won’t have to get overly restrictive with its monetary policy before ultimately shifting to an easing stance.”
The gains have come in the face of a number of problems that have caused unease on trading floors, including China-US tensions, the Ukraine war, supply chain snarls and extreme weather across much of the northern hemisphere.
The US Federal Reserve and other central banks have begun hiking interest rates to get a grip on soaring inflation, but those increases had been largely priced into the stock market in the first half of the year when equities slumped.
Thus the darkening clouds on the economic horizon mean that central banks may not need to raise rates as sharply as many investors believed, triggering the rebound in stocks.
A statement by policymakers and comments from Fed boss Jerome Powell after last month’s board meeting suggested they could be considering slowing the pace of rate hikes as the economy slows.
That was followed by a drop in inflation, which lifted markets.
But there has been downward pressure after minutes from the Fed’s most recent meeting showed policymakers are determined to keep lifting borrowing costs until prices are brought under control.
Several officials have also recently reasserted the need to continue to tighten monetary policy to get inflation down from four-decade highs, and poured cold water on hopes for possible rate cuts in the new year.
All eyes are now on next week’s central bankers’ symposium in Jackson Hole, Wyoming, where finance chiefs and central bankers will speak, with all attention on the utterances of Powell.
Wall Street’s three main indices opened lower, while Asian and European markets mostly fell heading into the weekend pause. – AFP
