Global stocks fall, yields jump as Fed holds firm on hikes

Global stocks fall, yields jump as Fed holds firm on hikes

The MSCI world equity index, which tracks shares in 45 nations, was down 0.85 per cent. — Reuters pic

Friday, 07 Oct 2022 7:39 AM MYT

WASHINGTON, Oct 7 ― US stocks fell while the dollar and Treasury yields jumped yesterday as Federal Reserve officials showed little sign of backing away from interest rate hikes ahead of today’s monthly US jobs report.

US stocks seesawed during the trading day, but ended lower after multiple Fed officials continued to emphasise that rates would continue to go up until inflation was under control.

The Dow Jones Industrial Average closed down 1.15 per cent, the S&P 500 lost 1.02 per cent and the Nasdaq Composite slipped 0.68 per cent.

The MSCI world equity index, which tracks shares in 45 nations, was down 0.85 per cent.

Investors will be looking to Friday’s Labour Department report for some clarity as to whether a steady diet of rate hikes has begun to take a bite out of the economy and high inflation. Economic data this week has produced conflicting views, with some signs of softening in labour demand while other reports indicated hiring was as robust as ever.

For their part, Fed officials’ remarks have undercut any fledgling hope the central bank may be preparing to step away from ongoing rate hikes.

A trio of officials hit the same tone yesterday, with Fed Governor Lisa Cook, Chicago Fed President Charels Evans, and Minneapolis Fed President Neel Kashkari all emphasising in remarks that the inflation fight was ongoing and they were not prepared to change course.

Opposite stocks, the dollar and US Treasury yields both gained on the day.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 1.103 points or 0.99 per cent, to 112.177. The benchmark 10-year Treasury note grew 6.3 basis points to 3.812 per cent.

“The rise in US yields is weighing on equities and it is driving up the US dollar too,” said David Madden, market analyst at Equiti Capital. “In recent weeks, the greenback has been a popular safe haven play and considering the fall in equities, it is also receiving a lift in that regard.”

Labour loosening?

Markets were also volatile ahead of today’s jobs report as investors weighed competing narratives from other data.

Yesterday, the US Labour Department reported initial claims for jobless benefits came in at 219,000 for the week ended October 1, exceeding economist expectations of 203,000.

“The job market is still solid but is softening,” said Bill Adams, chief economist for Comerica Bank. “As the unemployment rate ticks higher, wage growth will likely slow, taming some of the inflationary pressure in the US economy.”

Complicating the near-term outlook further is next week’s data on US consumer inflation, which is expected to have slowed for a third month in September to 8.1 per cent, still its highest since the mid-1980s.

Plans by the Organisation of the Petroleum Exporting Countries and its partners, including Russia, to steeply cut oil production continued to drive oil prices higher, where prices jumped for the fourth straight day.

Brent crude futures settled 1.1 per cent higher at US$94.42 (RM437.83) a barrel, and US crude closed up 0.8 per cent at US$88.45 a barrel. ― Reuters