ASX Plunges as Wall Street Collapses After Jerome Powell’s Aggressive Comments on US Monetary Policy

Australian stocks opened sharply lower as risk appetite ebbed due to a negative finish in US stocks on Friday after Federal Reserve Chairman Jerome Powell reiterated a hawkish tone to fight inflation.

The ASX 200 was down 134 points, or 1.9 percent, at 6,970, as of 10:27 am AEST.

At the same time, the Australian dollar fell to 68.70 US cents.

All 11 sectors fell, with utilities and consumer non-cyclicals leading losses.

Pinnacle (-8.8pc), Life360 (-8.7pc) and Coronado Global Resources (-7.9pc) were among the worst performers at the open.

US stocks sell off after Powell comments

An index of global stock markets fell while short-term US Treasury yields rose on Friday, after Powell said the US economy will need tight monetary policy “for some time” before inflation is brought under control. .

The dollar erased early losses to turn positive against a basket of currencies, while gold, which has become less attractive as interest rates rise, fell after Powell’s comments.

Tight monetary policy “for some time” means slower growth, a weaker job market and “some pain” for households and businesses, Powell said in an address to the central bank conference in Jackson Hole, Wyoming.

“Reducing inflation is likely to require a sustained period of below-trend growth. In addition, labor market conditions are very likely to soften,” Powell said.

He did not hint at what the Fed might do at its next monetary policy meeting on September 20-21. Officials are expected to approve a rate increase of 50 or 75 basis points.

Interest rate futures linked to Fed policy expectations fell on Friday moments after Powell’s speech, reflecting increased chances of a third straight 75 basis point rate hike.

“It was as aggressive as expected. Powell’s message is clear: the Fed is far from done in its fight against inflation,” said Antoine Bouvet, senior rates strategist at ING in London.

MSCI’s gauge of global shares lost 2.5 percent, its worst day in more than two months.

Wall Street’s main indexes fell, with Powell’s comments dragging down mega-cap growth and technology stocks.

“His comments were aggressive. He keeps the pedal to the metal when it comes to policies to combat inflation,” said Lindsey Bell, chief money and markets strategist at Ally.

The Dow Jones Industrial Average fell 1,008 points, or 3 percent, to close at 32,283, the S&P 500 lost 141 points, or 3.4 percent, to finish at 4,058 and the Nasdaq Composite fell 498 points, or 3.9 percent. cent, to close the session at 12,142.

European stocks fell

Investors, meanwhile, were also worried about downbeat data on German consumer confidence due to rising energy costs.

Consumer morale in the euro zone’s two largest economies diverged sharply in August, as French consumers benefited from new government measures, while concerns about rising energy bills weighed on their German counterparts. , polls showed on Friday.

The pan-European STOXX 600 index lost 1.7 percent.

Oil prices finished higher on Friday, buoyed by signs from Saudi Arabia that OPEC might cut output, but trading was volatile as investors digested and eventually shrugged off the Fed’s warning about the economic pain ahead.

Brent crude oil was lower, trading at $100.07 a barrel, at 10:14am AEST.


Be the first to comment

Leave a Reply

Your email address will not be published.