Market expectations of a bond purchase reduction program (tapering) and a 0.25% rate hike in March by the Federal Reserve (Fed) continued to weigh on stock markets with shares in Asian markets falling.
It is believed that the Fed will start the first step of a rate hike of 0.25% and 3 more times a hike of up to 1.0% by the end of the year.
Moreover, concerns about the Russia-Ukraine crisis with the U.S. State Department pulling out family members of embassy staff in Kyiv and President Joe Biden’s report considering sending thousands of troops to NATO allies in Europe impacted the stock market.
The MSCI broad index of Asia-Pacific stocks outside Japan was down 0.1% and Japan's Nikkei was at 1.0% but Wall Street futures tried to make a rebound with the S&P 500 futures up 0.4% and the Nasdaq Composite futures at 0.7%.
Capital Economics economist Oliver Allen noted that despite the decline, the S&P 500 is still 40% at its highest level since 2019 and the Nasdaq 60%.
He added that investors could not rely on the ‘Fed put’ as the central bank tightening cycle had not yet begun and the strength of the US economy showed that tighter policies were more appropriate.
Meanwhile, the earnings season went well with companies reporting this week including IBM, Microsoft, Johnson & Johnson, Intel, Tesla, Apple and Caterpillar.
10 -year treasury yields rose 22 basis points at 1.77%.
The dollar index, which measures a number of other currencies, rose 0.5% at 85.647 while the Euro was at $ 1.1341 after failing to sustain a recent rally at $ 1.1500.
The Japanese yen, a safe haven currency, was at 113.66 and approached last week's low of 113.47.
Gold traded at $ 1,833 an ounce after hitting a 6 -week high of $ 1,842 last week.
Oil prices soared further with Brent oil prices adding 74 cents at $ 88.64 a barrel while US crude oil prices rose 70 cents at 85.84%.
