Stocks and U.S. futures fell after Jerome Powell said the Federal Reserve would raise interest rates more than previously anticipated, sapping risk appetite. Global bond yields rose.
The selloff spread in the wake of the S&P 500's 2.5 per cent drop on Wednesday. Chinese shares in Hong Kong underperformed after an affirmation of the government's COVID-Zero stance dashed hopes of a reopening. The Fed raised rates 75 basis points for the fourth time in a row, bringing the top of its target range to four per cent, the highest level since 2008.
Investors are concerned about the impact of central bank tightening on economic growth, and Powell left little doubt that he's prepared to push rates as high as needed to stamp out inflation. European Central Bank President Christine Lagarde warned on Thursday that a “mild recession” is possible but that it wouldn't be sufficient in itself to stem soaring prices.
“There is likely some profit taking in long dollar positions after the big moves post the FOMC meeting outcome and Powell's press conference,” said David Forrester, a senior FX strategist at Credit Agricole CIB in Hong Kong.
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