Some analysts say equities had been showing too much optimism about an economic improvement
, as both the US Federal Reserve and the European Central Bank remain resolute about continuing to tighten monetary policy to battle inflation.
“The market remains unprepared for the wave of pain that is coming from credit conditions tightening,” Andreas Bruckner, European equity strategist at Bank of America, said. The US Fed also looks set to sustain its tightening campaign, even after reports on Wednesday showed retail sales, producer prices and production at US factories fell more than expected in December. On Thursday, US weekly jobless claims were lower than expected, pointing to a tight labour market and sending Wall Street's S&P 500 share gauge 0.8% lower.
Those comments by “usually reliable Fed dove” Brainard in particular are “compounding rate hike fears”, said Tony Sycamore, an analyst at IG.The market expects the Fed's benchmark interest rate will be a touch below 5% in June, implying just over 50 basis points of additional tightening.The dollar index — which measures the US currency against six peers, including the euro and yen — edged 0.14 higher to 102.17, adding a bit more distance from the seven-and-a-half-month low of 101.
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