Global Stock Markets Spooked by Central Banks’ Hard Stance on Fighting Inflation till the End

Stocks fell Monday as worries over rising rates and tighter monetary policy added fuel to a rout that began in the previous session. U.S. Federal Reserve Chairman Powell hinted at more interest rate hikes to come at the Fed's annual conference in Jackson Hole, Wyoming, on Friday, indicating borrowing costs will continue to climb and debt will be increasingly expensive to service. He also suggested that the road ahead would “bring some pain to households and businesses” in the U.S., an “unfortunate cost of bringing down inflation.” In response to that, speaking on CNN's "State of the Union," former U.S. President candidate, Democratic senator of Massachusetts Elizabeth Warren responded to Federal Reserve's highly criticized remarks that the central bank is pledging "forceful and rapid action" against inflation that will "bring some pain" to Americans. "I just want to translate what Jerome Powell just said. What he calls 'some pain' means putting people out of work, shutting down small businesses, because the cost of money goes up, because the interest rates go up," Warren said on Sunday. As a result, S&P 500 futures slipped 0.54% as of 3:45 p.m. EST. Futures for the Dow Jones Industrial Average slid about 0.72%. Those for the Nasdaq Composite dropped 0.35%, concurrently.

The DXY Dollar Spot Index pushed toward the record high reached last month as investors fled to safe havens from spiking volatility. The Japanese yen along with most commodity-linked currencies, the British pound and the offshore yuan were under pressure. Bitcoin (BTCUSD) showed weakness again by breaking below the $20,000 crucial level. Gold retreated to $1739/oz, but oil made gains on supply risks. Oil prices substantially rebounded as Brent Crude futures rose 2.07% to $102.68 per barrel, while U.S. WTI crude futures surged 2.14% to trade at $94.97 a barrel at the time of writing.

European stocks extended last week’s drop. As of 3:45 p.m. CET, The Stoxx Europe 600 Index fell 1.01%, British FTSE 100 slipped 0.7% while the French CAC 40 Index shed 1.05%, and the German DAX fell 0.88%. European Central Bank board member Isabel Schnabel warned that central banks must continue to fight inflation – even if it tips economies into recession.

Asian markets also traded notably lower earlier today. Thus, Japan’s Nikkei 225 fell 2.66%, while Hong Kong’s Hang Seng Index fell 0.73%. Australia’s S&P/ASX 200 nosedived by 2%, while India’s S&P BSE Sensex declined 1.5%. However, China’s Shanghai Composite edged higher by 0.14%. On the macro side, the index of coincident economic indicators in Japan declined to 98.6 in June vis-à-vis the flash level of 99.0, while index of leading economic indicators was revised higher to 100.9 from 100.6. Retail sales in Australia climbed by 1.3% MoM to AUD 34.67 billion in July, beating market expectations of 0.3%.