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US stocks sank on Tuesday, while crude oil rose, as traders prepared for a rush of monetary policy announcements from central banks around the world.
Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq Composite fell 0.7 per cent and 0.8 per cent, respectively, in morning trade in New York. A measure of the dollar’s strength against six other currencies weakened 0.1 per cent.
The declines in equity markets came ahead of the US Federal Reserve’s meeting on Wednesday, with markets pricing in a 99 per cent chance that interest rates will remain unchanged.
More important for investors will be what rate-setters say about November’s meeting, as well as the Fed’s predictions for short-term interest rate expectations. The UK, Switzerland and Japan are among the other countries whose central banks are meeting this week.
“Until we get those communications, what’s the sense in pushing prices in a particular direction?” said Mike Zigmont, head of trading at Harvest Volatility Management. “I’m sticking with the we’re-on-hold-until-the-Fed-tells-us-something narrative.”
The latest data on US consumer prices bolstered fears that the Fed’s last push to bring inflation back to its 2 per cent target might take longer than expected. Rising energy costs pushed the headline figure above forecasts, to 3.7 per cent in August.
Brent crude, the international benchmark, extended gains into a fourth successive trading session, rising 0.6 per cent to $95.03. West Texas Intermediate, the US equivalent, added 0.8 per cent to $92.22. Both benchmarks touched their highest price in 10 months earlier in the day.
The gains have been spurred by news earlier this month that two of the world’s top producers, Saudi Arabia and Russia, will extend supply cuts until the end of the year.
Traders fretted that the uptick in oil prices could hamper central banks’ efforts to tame inflation in the US and Europe, adding to the banks’ case for keeping interest rates higher for longer, despite indications suggesting that global economic growth was slowing.
“The latest spike in oil prices is massively unhelpful, especially as inflation was already above central banks’ 2 per cent targets,” said Dario Perkins, managing director of global macro at TS Lombard. “That said, it is important to keep these recent inflationary developments in context. We are not yet in danger of undoing 12 months of solid disinflationary progress — not even close.”
Elsewhere, the region-wide Stoxx Europe 600 index fell 0.1 per cent, with positive moves for real estate, financials and energy stocks cancelled out by declines for healthcare groups and industrials. London’s FTSE 100 rose 0.1 per cent, as did France’s Cac 40.
China’s benchmark CSI 300 index fell 0.2 per cent, while Japan’s Topix was up 0.1 per cent as markets reopened after a holiday.
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