Negative closing for the Tokyo stock exchange, which aligns with the negative trend of Wall Street triggered by the statements, last Friday, by Fed Chairman Jerome Powell. The Nikkei 225 index lost 2.66% to 27,878.96 points.
Sell also on other Asian stock exchanges, such as on the Hong Kong stock exchange (-0.86%), after the collapse of the main US stock indices.
Sidney down -1.95%, while Seoul slipped by 2.14%. The Shanghai Stock Exchange is flat.
In what can be considered a true Black Friday for the stock market, the Dow Jones Industrial Average plunged 1,008 points, or -3.03% to 32,283.40.
The S&P 500 fell 3.37% to 4,057.66 and the Nasdaq Composite slipped 3.94%, to 12,141.71.
The Dow Jones suffered the worst session since May, while the S&P 500 and Nasdaq Composite ended the worst session since June. The disposals canceled the gains that all three US equity indices had reported in August, which is now nearing completion.
It all started with Powell’s words, who confirmed the US central bank’s determination to stop inflation, admitting that the Fed will continue to raise interest rates in such a way as to also cause “some suffering” to the US economy. .
“Price stability is the responsibility of the Federal Reserve and serves as the foundation of our economy,” said Jerome Powell in his Jackson Hole speech. “Without price stability, the economy doesn’t work for anyone,” he added.
In the Jackson Hole symposium particularly hawkish statements also came from the members of the Governing Council of the ECB, to be precise from the central banker of Finland Olli Rehn (who also commented on the importance of the euro in determining the monetary policy of the Central Bank European), the central banker of France Francois Villeroy de Galhau and Martins Kazaks, number one of the Central Bank of Latvia.
Rehn says: “The next step (of the ECB) will be a significant move in September, depending on the upcoming (macro) data and the outlook on inflation.” Villeroy of France also called for another significant monetary tightening in September, hoping that rates would rise to the “neutral” level before the end of the year, calculated between 1% and 2%.
The banker also stressed that, in case of need, rates may have to exceed even the neutral level.
And the Latvian hawk Kazaks said outright that “the rate hike will have to be strong and significant and, at the moment, I would say 50 or 75 basis points”.
From the macro front of the Asia Pacific area, the data relating to retail sales for Australia was released today, which rose by 1.3% on a monthly basis in July, to a record value of 34.7 billion Australian dollars, well above analysts’ estimates of an increase of + 0.3%.
Growth was the strongest in the past four months.
In addition, retail sales in Australia jumped by 16.5% on an annual basis: however, it must be considered that, in July of last year, several stores had been closed due to the lockdown measures launched against the Covid-19 pandemic. That said, Australians’ propensity to consume has shown undoubted resilience.
Instead, watch out for Goldman Sachs’ negative note on China, in particular on the manufacturing activity of the country, also due to the effects of the zero Covid policy that distinguishes China in the fight against the pandemic.
The analysts of the US banking giant expect that the official data drawn up by Beijing, relating to the manufacturing PMI in August, will show a further worsening of the contraction phase, falling to 48.8 from 49 in July. The private SME index drawn up by Caixin is also expected to turn into a contraction phase: in this case, Goldman Sachs expects a drop to 49.8 points from 50.4 points in July.
As we write the euro is under further pressure, dropping 0.20% (but had lost more than -0.40%) against the dollar which means that, on forex, traders are pricing the Fed’s hawkish statements more. by Jerome Powell – also arrived at the Jackson Hole symposium – as well as the hawkish ones of the ECB exponents.
The euro stands at around 0.9924, while the US Dollar Index is moving at 109.24 points, a step away from the 20-year record tested in July at 109.29 points.