World News | US, World Markets Rattled by Plans for More Rate Hikes
Get latest articles and stories on World at LatestLY. Shaken by the Federal Reserve's aggressive stance this week on rates hikes to come, US futures sold off sharply, pointing major markets toward another weekly loss.
Washington, Dec 16 (AP) Shaken by the Federal Reserve's aggressive stance this week on rates hikes to come, US futures sold off sharply, pointing major markets toward another weekly loss.
Futures for the Dow Jones Industrial Average and the S and P each skidded 1.1 per cent before the opening bell on Friday.
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Shares in Europe and Asia also fell as investors everywhere now fear that the Federal Reserve and other central banks might bring on recessions by pushing rates higher to get inflation under control.
The Fed is slowing the pace of its rate increases but signalled rates will likely remain higher over the coming few years than it had previously anticipated.
That has disappointed investors who hoped recent signs that inflation is easing would persuade the Fed to lighten up on the brakes it's applying to the US economy.
The federal funds rate stands at a range of 4.25 per cent to 4.5 per cent, the highest level in 15 years.
Fed policymakers forecast that the central bank's rate will reach a range of 5 per cent to 5.25 per cent by the end of 2023. Their forecast doesn't call for a rate cut before 2024.
Many believed that with inflation pressures gradually easing, the Fed might soon declare some progress in their fight and perhaps even reverse course and cut rates sometime in 2023.
The latest wave of selling came after central banks in Europe raised interest rates a day after the US Federal Reserve hiked its key rate again, emphasising that interest rates will need to go higher than previously expected in order to tame inflation.
Like the Fed, central bank officials in Europe said inflation is not yet corralled and that more rate hikes are coming. The European Central Bank, Bank of England, and Switzerland's central bank all pushed through half-point rate hikes on Thursday.
“We are in for a long game,” European Central Bank President Christine Lagarde said at a news conference on Thursday.
In Europe at miday on Friday, Germany's DAX was down 0.6 per cent and Britain's FTSE 100 slipped 1.4 per cent. In Paris, the CAC 40 shed 1.2 per cent.
On Thursday, the S and P 500 fell 2.5 per cent, the tech-heavy Nasdaq composite lost 3.2 per cent and the Dow gave back 2.2 per cent.
Barring a strong reversal, major indexes will finish with losses for the second straight week.
In Asia, China's move to relax COVID restrictions has raised hopes for an end to massive disruptions from lockdowns and other strict measures to prevent infections. But signs of sharply rising case numbers have raised uncertainty, with some alarmed over the possibility that the pandemic will continue to drag on the economy.
Hong Kong's Hang Seng added 0.4 per cent to 19,450.67, while the Shanghai Composite index ended less than 1 point lower at 3,167.86.
Tokyo's Nikkei 225 lost 1.9 per cent to 27,527.12 after a survey of manufacturers showed a further deterioration in the outlook for manufacturers.
The Kospi in Seoul lost less than 1 point to 2,360.02, while Australia's S and P/ASX 200 declined 0.8 per cent to 7,148.70.
Shares in Taiwan fell 1.4 per cent and the SET in Bangkok lost 0.1 per cent. Mumbai dropped 1.4 per cent.
The central bank has been fighting to lower inflation at the same time that pockets of the economy, including employment and consumer spending, remain strong. That has made it more difficult to rein in high prices on everything from food to clothing.
On Thursday, the government reported that the number of Americans applying for unemployment benefits fell last week, a sign that the labour market remains strong.
Meanwhile, another report showed that retail sales fell in November. That pullback followed a sharp rise in October.
In other trading Friday, benchmark US crude oil lost USD 1.79 to USD 74.32 a barrel in electronic trading on the New York Mercantile Exchange. It lost USD 1.17 on Thursday to USD 76.11 per barrel.
Brent crude, the pricing basis for international trading, shed USD 1.90 to USD 79.31 per barrel.
The dollar fell to 137.13 Japanese yen from 137.81 yen late on Thursday. The euro fell to USD 1.0621 from USD 1.0627. (AP)
(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)