Global stocks, bitcoin, oil prices tumble over recession worries

Global stock markets mainly dropped on Friday, with investors focused firmly on the outlook for interest rate hikes as central banks battle to bring down sky-high inflation.

The dollar rose against main rivals, while oil prices slid more than two per cent as traders assessed the risk of a possible global recession.

European gas prices pushed higher after a record-close on  Thursday as the Ukraine war impacts supplies.

Elsewhere, bitcoin slumped nearly seven per cent as investors shunned risky assets.

A two-month equity markets rally from June lows appears to have run out of steam, with downward pressure coming after minutes from the Fed’s most recent meeting showed policymakers are determined to keep lifting borrowing costs until prices are brought under control.

The gains have come in the face of a number of problems that have caused unease on trading floors, including China-US tensions, the Ukraine war, supply chain snarls and extreme weather across much of the northern hemisphere.

A statement by policymakers and comments from Fed boss Jerome Powell after last month’s board meeting suggested they could be considering slowing the pace of rate hikes as the economy slows.

That was followed by a drop in inflation, which lifted markets, but was followed by several officials reasserting the need to continue to tighten monetary policy to get inflation down from four-decade highs.

This week’s minutes and comments from a number of Fed top brass reinforced that view, with some pouring cold water on hopes for possible rate cuts in the new year.

All eyes are now on next week’s central bankers’ symposium in Jackson Hole, Wyoming, where finance chiefs and central bankers will speak, with all attention on the utterances of Powell.

Wall Street’s three main indices edged up Thursday after the previous session’s losses, while Asian and European markets mostly fell heading into the weekend pause.

OANDA’s Edward Moya warned that markets would remain wobbly for a while.

“Stocks will most likely struggle for direction for the rest of the summer as Wall Street is still uncertain with how aggressive the Fed will be in September,” he noted.

“Traders however will continue to pay close attention to developments with the war in Ukraine.”

Lewis Grant, of Federated Hermes, added that “investor risk appetite remains fragile”.

US stocks fell and the dollar rose on Friday even as Treasury yields gained, with traders weighing additional interest rate hikes from the Federal Reserve to combat inflation.

With higher rates looming, high-growth and technology stocks such as Amazon.com Inc and Alphabet Inc fell more than 2%. Banks declined and were on track to end the week lower, potentially snapping their six-week winning streak. And an earnings-miss by heavy equipment maker Deere & Co. added to the risk-off mood.

The Dow Jones Industrial Average fell 0.84%, to 33,713.26, the S&P 500 lost 1.28%, to 4,228.83 and the Nasdaq Composite dropped 2%, to 12,704.30.

European shares fell on Friday and posted a weekly loss as the highest-ever jump in German producer prices in July added to gloom over the economic outlook. The pan-European STOXX 600 ended 0.8% lower.

The MSCI world equity index, which tracks shares in 47 countries, was down 1.28%.

“When market participants start to return from their holidays and look back ... they will find central banks still far from having achieved their goals of reining in inflation,” ING rates strategists said in a note to clients.

“That means a continued tussle between central bank tightening expectations and recession fears.”

The Federal Reserve needs to keep raising borrowing costs to bring high inflation under control, a string of U.S. central bank officials said on Thursday, even as they debated how fast and how high to lift them.

The U.S. dollar benefited from the Fed’s hawkish comments and investor caution, hitting a one-month high. The dollar index was up around 0.6% at $108.14 and the euro was down 0.50% at $1.0036. The 10-year U.S. Treasury yield climbed to near a one-month high at 2.9776%.

Next week, investors will be paying close attention to minutes from the European Central Bank’s July meeting, as well as comments by U.S. Federal Reserve Chair Jerome Powell when he addresses the annual global central banking conference in Jackson Hole on Aug. 26.

“Incoming data, on net, suggests the U.S. economy retains fairly healthy momentum,” Michael Gapen, a Bank of America economist, wrote in a client note. He cited improving motor vehicle assembly and retail sales data, but noted declining housing numbers.

“Incoming data was not uniformly strong ... and we note that stronger momentum will ultimately be met with additional policy rate firming,” Gapen added.

urrencies fell sharply, with sudden selling dragging bitcoin to a three-week low. It was last at $21,479, down more than 8% on the day.

Gold was headed for its first weekly drop in a month after hitting a three-week low. Spot gold fell for a fifth straight session, down about 0.5% at $1,749 per ounce, in what could be its longest losing streak since November 2021.

Agencies