On Monday, there was a decline in Asian shares and the dollar continued its climb, with fears over global growth as rate hikes continue amongst central banks.

Meanwhile, a moderate easing in China only pushed its problems in the property market into the spotlight.

Tightening policy

Later this week, the chairman of the Federal Reserve, Jerome Powell will speak at Jackson Hole, Wyoming, along with other policymakers.

The risks are that his stance will not be dovish, as investors are hoping, and he would continue to be hawkish.

Market analysts said that they expected the Fed chair to remind that further tightening is required because there is still a long battle against inflation.

However, it is not expected that the chairman will mention the specific rate hike to expect in the Fed’s meeting in the next month.

Analysts said that such a bland delivery could prove to be underwhelming for the markets. Future pricing has already adjusted for another rate increase in September.

But, the real question is whether it will be by half a percentage point or 75 basis points. It is expected that the rate will climb to 3.5% to 3.75% by the end of the year.

China

China has remained an exception to the tightening trend, as the People’s Bank of China (PBoC) announced a rate reduction on Monday between 5 and 15 basis points.

This was done for supporting a troubled housing industry and a slowing economy. The worries about China’s economy saw the yuan drop to a low of 23 months, while stocks across the region were pressured.

Markets fall

There was a 0.6% drop in the MSCI’s index of Asia-Pacific shares excluding Japan, even though there was a 0.7% gain in Chinese blue chips.

There was also a 1.3% drop in the KOSPI index of South Korea, while a 0.5% drop was seen in the Nikkei 225 index. However, it has recently gotten some support as the yen has reversed sharply.

A 0.2% drop was also recorded in EUROSTOXX 50 futures and 0.1% in FTSE futures. A 0.5% and 0.6% easing was seen in S&P 500 and Nasdaq futures, respectively.

The S&P 500 ended the previous week down by 1.2% and was unable to clear its moving-day average of about 4,320.

Yields spike

Last week, global bond yields experienced a steep rise, which did not do equity valuations any good.

There was a rise in the 10-year government bond yields in Britain by the most in the last five years, after a shocking inflation report.

There was a 14 basis point increase in 10-year Treasury yields in the previous week and they were last recorded at 2.98%. The curve reflected the recession risk, as it was deeply inverted.

The US dollar has gotten a boost because of the air of global uncertainty, as it is regarded as a liquid safe haven.

The dollar index was at 108.22 against a basket of currencies and it rose by 2.3% in the previous week, making it its best performance since April 2020.