Performance of United State stocks and other global markets lost momentum this week as investors were put on the edge after indications went rife for the federal government to raise interest rate, coupled with other negative trends in the markets.
The Federal Reserve Chairman, Jerome Powell addressed the Senate Banking, Housing and Urban Affairs Committee on Tuesday morning.
Powell’s remarks came with the central bank weighing the future of monetary policy and its impact on the inflation fight.
The US Federal Reserve will likely need to raise interest rates more than expected in response to recent strong economic data, Powell told the committee.
He also said that the Fed is prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control inflation.
Already, officials have raised their benchmark interest rate eight times over the past year, taking the fed funds rate to a target range of 4.50% to 4.75%.
Markets were looking to Powell for clarity on how much further the Fed is likely to push rates. While inflation data started to drift down towards the end of 2022, January indicated that prices rose briskly and could pose a threat ahead.
In response to the development, US equities (DJIA: -3.4%; S&P 500: -3.1%) recorded huge losses as a rout in tech-industry lender, SVB Financial Group, sparked selloffs across banking stocks.
Likewise, European equities (STOXX Europe: -0.9%; FTSE 100: -0.8%) fell as worries ahead of the US jobs report and weakness in the banking sector outweighed better-than-expected UK GDP data.
Similarly, in Asia, Chinese equities (SSE: -3.0%) declined due to concerns over the outlook for China’s technology sector.
On the contrary, Japanese equities (Nikkei 225: +0.8%) outperformed peers following expectations that the Bank of Japan will maintain its ultra-accommodative stance in the near term.
Elsewhere, the Emerging (MSCI EM: -2.0%) market index dipped consequent upon selloffs in China (-3.0%) while the Frontier (MSCI FM: +0.2%) market index edged higher following gains in Vietnam (+2.4%).
