Asian stocks slide on fears of sharp rate hikes in US, Europe

by | Aug 28, 2022 | World

Markets drop as US Federal Reserve Chair Jerome Powell promises policy “pain” to contain inflation.Asian shares slid on Monday as the mounting risk of more aggressive rate hikes in the United States and Europe shoved bond yields and the dollar sharply higher, and tested equity and earnings valuations.
US Federal Reserve Chair Jerome Powell’s promise of policy “pain” to contain inflation quashed hopes that the central bank would ride to the rescue of markets as so often in the past.
The tough love message was driven home by European Central Bank (ECB) board member Isabel Schnabel, who warned over the weekend that central banks must now act forcefully to combat inflation, even if that drags their economies into recession.
That triggered a sharp fall in Euribor futures as markets priced in the risk the ECB could hike by 75 basis points next month.
“The main takeaways are taming inflation is job number one for the Fed and the Funds Rate needs to get to a restrictive level of 3.5 percent to 4.0 percent,” said Jason England, global bonds portfolio manager at Janus Henderson Investors.
“The rate will need to stay higher until inflation is brought down to their 2 percent target, thus rate cuts priced into the market for next year are premature.”
Futures are now pricing in about a 64 percent chance the Fed will hike by 75 basis points in September, and see rat …

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