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Strong jobs data and hawkish comments from a top Federal Reserve official made investors nervous ahead of a closely watched central bank meeting on Friday, with shares in Asia falling and markets in Europe depressed.
Following losses on Wall Street overnight, Hong Kong’s Hang Seng fell 1.2%, China’s CSI 300 fell 0.4% and Japan’s Topix fell 0.9%.
In Europe, the pan-European Stoxx Europe 600 reversed earlier losses to rise 0.1%, while France’s Cac 40 and Germany’s Dax were also just in positive territory.
Investors were preparing for the annual gathering of central bankers in Jackson Hole, Wyoming, where Federal Reserve Chair Jay Powell and European Central Bank President Christine Lagarde will speak.
The meeting comes as anxiety mounts over the future of global interest rates, with investors debating how long it will take major central banks to declare victory in the fight against inflation.
Until recently, most market participants thought the Fed had done its job of raising the benchmark federal funds rate, which is now at a 22-year high, but signs of a tight labor market and strong consumer spending have led some traders to expect another hike. interest possibility. Tighten up this fall.
Boston Fed President Susan Collins said in an interview on Thursday that while the central bank is near the top of its rate-hike cycle, it is “very likely that further hikes will be needed.”
Adding fuel to the fire, U.S. new jobless claims, a proxy for layoffs, fell short of expectations, suggesting that high borrowing costs have yet to impact the labor market.
“The inflation data will now take a backseat as it more or less follows the predicted path,” said Mohit Kumar, chief European financial economist at Jefferies. The certainty lies in the employment situation, which is proving to be much stronger than most investors expected.”
The dollar, which tends to rise when investors forecast higher interest rates, rose 0.2% against a basket of six other currencies to hit its highest level since late May.
A sell-off in U.S. government bonds that pushed long-term debt yields to 16-year highs earlier this week continued on Friday, with the benchmark 10-year U.S. Treasury yield up 0.01 percentage point to 4.25 percent. Bond yields rise as prices fall.
Futures contracts tracking Wall Street’s benchmark S&P 500 rose 0.1%, while futures contracts tracking the tech-heavy Nasdaq 100 fell 0.1% ahead of the New York open.