Markets fluctuate as oil, Euro struggles
JOHANNESBURG – Asian markets yesterday fought to recover some of the losses suffered at the start of the week, as recession alarms continue to ring loud and oil struggled to erase the previous day’s sharp drop owing to growing demand fears.
The Euro clawed its way back slightly after hitting parity with the Dollar for the first time in two decades, though it remains under pressure from growing concerns about an energy crisis across the Eurozone and the European Central Bank’s slower pace of monetary tightening.
Traders were also awaiting the release of a series of key indicators this week, including the all-important consumer price index later yesterday, with expectations for another increase to a fresh 41-year high.
Another big spike in prices will reinforce the Federal Reserve’s determination to lift interest rates 75 basis points for a second successive month in July, adding to concerns that officials could go too far and tip the economy into recession.
Policymakers
Still, Lauren Goodwin of New York Life Investments said policymakers were unlikely to shift from their hawkish tilt for now.
“This is widely expected to be a really strong print,” she told Bloomberg Television.
“Even if it is not, I don’t think that changes the Fed’s perspective in a couple of weeks. We won’t have enough evidence that inflation is convincingly turning over.”
In a further sign of the pressure being felt around the world from surging prices, the South Korean central bank lifted rates 0.5 percentage points yesterday, the first such increase since 1999.
While European markets enjoyed a rare advance, thanks to bargain-buying, all three main indexes on Wall Street dropped.
Asian equities fluctuated, with Tokyo, Hong Kong, Seoul, Wellington and Taipei slightly higher but Shanghai, Sydney, Singapore, Manila and Jakarta in the red.
Crises
Stephen Innes at SPI Asset Management said equities could continue to struggle owing to a perfect storm of crises engulfing trading floors.
“Typically, equity markets can deal with one risk relatively well,” he said in a note. “But the current setup of sticky inflation, rapid Fed tightening, growth/recession risks and excessive rates volatility, to name a few, have at times left investors defenceless.”