A look at the day ahead in European and global markets from Alun John
Equity markets have, at last, started listening to central bank policymakers, now increasingly singing from the same hymn sheet, but stocks don’t like the tune.
Fed Chair Jerome Powell said on Friday the U.S. central bank will continue to raise rates to curtail inflation even as those rate increases cause pain for households and business.
In time with Powell, European Central Bank board member Isabel Schnabel said on Saturday, central banks around the world risk losing public trust and must now act forcefully to combat inflation, even if that drags their economies into a recession.
Asian shares (.MIAPJ0000PUS) slid nearly 2% on Monday morning, Nasdaq futures were off 1.22% even after the tech heavy benchmark (.IXIC) lost nearly 4% on Friday, and Euro Stoxx 50 futures dropped 1.3%.
The reaction was rather different from that to a recent set of public remarks from Powell earlier in the summer, which markets decided, somewhat imaginatively, to interpret as a possibility the Fed would pivot to worrying about recession risks, sending stocks higher.
Markets were busy in Asia on Monday. U.S. yields rose, especially at the short end, driving up the dollar.
The greenback climbed particularly on the Japanese yen up 0.83%, and the Chinese yuan , jumping the key threshold of 6.9 per dollar.
This was not surprising as the Bank of Japan and the People’s Bank of China are the last two significant remaining central banks still using the monetary easing hymn book.
There is comparatively little on Monday’s agenda to distract from the central bankers’ remarks.
Britain is closed for a holiday, though a new report from Goldman Sachs predicting the country will fall into recession in the fourth quarter will not be cheerful park bench reading for investors.
Key developments that could influence markets on Monday:
London markets closed for a public holiday
EU defence ministers meeting to Aug 30