(Bloomberg) — Federal Reserve Chair Jerome Powell’s signal of higher-for-longer interest rates coursed through markets Monday, sinking stocks and equity futures and lifting two-year Treasury yields to levels last seen in 2007.
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An Asian share index fell more than 2%, the most in over two months. Losses on Nasdaq 100 and European futures were at least 1.5%. China and Hong Kong declines were smaller amid progress on the US-China delisting spat.
The Bloomberg Dollar Spot Index pushed toward the record hit last month as investors sought a haven from spiking volatility. Commodity-linked currencies as well as the yen, the pound and the offshore yuan were under pressure.
Bonds sold off amid a deepening inversion of the US yield curve that underscores expectations of a recession under tightening monetary policy. The US two-year yield, sensitive to expectations around Fed policy, hit 3.45%
Powell in his address last week at the Fed’s Jackson Hole symposium flagged the likely need for restrictive monetary policy for some time to curb high inflation and cautioned against loosening monetary conditions prematurely. He also warned of the potential for economic pain for households and businesses.
Those comments contrast with bets for reductions in US borrowing costs next year as growth slows. The locus for much of the investor angst is the equities market, further undoing a bounce in global shares from the bear-market lows of mid-June. Other risks include China’s slowdown and Europe’s energy crisis.
Powell signaled “once they get to whatever the final hike is, they’re going to stay there for a while,” Charles Schwab & Co. Chief Investment Strategist Liz Ann Sonders said on Bloomberg Television. “The market had trouble digesting that.”
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Bitcoin broke below the $20,000 level some view as a marker of a deeper slide in investor sentiment. Gold retreated but oil made gains as traders evaluated risks to crude supplies.
The relative resilience in China’s stock market may reflect optimism about a preliminary deal between Beijing and…
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