ASX likely to rally, Wall Street sell-off intensifies as rate hike fever persists

Australian stocks are expected to recover some of yesterday’s sharp losses, despite another drop in global markets on the prospect of more aggressive interest rate hikes in the US and Europe.

ASX futures were up 0.3 percent at 6,896 points by 7:20 a.m. AEST.

The Australian dollar rose slightly to 69 US cents, while the US dollar briefly hit a 20-year high.

US Federal Reserve Chairman Jerome Powell said on Friday that the US economy would need tight monetary policy “for some time” before inflation was brought under control.

His aggressive comments were delivered at the Jackson Hole central bankers summit in Wyoming and dashed hopes the Fed might pivot to more dovish rate hikes after recent data suggested inflation may be slowing.

Isabel Schnabel, a member of the board of the European Central Bank, added to the market concern.

He warned on Saturday that central banks risk losing public confidence and must act forcefully to rein in inflation, even if it drags their economies into recession.

‘Deeper recession’ with faster rate hikes

Investors, aware that rates would remain high even as recession risks increased, decided to sell their risk assets.

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