HONG KONG, June 20(ABC): Asian markets fell again Monday and oil prices extended losses on growing fears that central bank moves to rein in soaring inflation will induce a recession.
The losses come after a sell-off last week fuelled by the Federal Reserve’s sharp interest rate hike last week — the biggest in nearly 30 years — and a warning of more to come, while increases in Britain and Switzerland added to the gloom.
And while the S&P 500 and Nasdaq saw gains on Friday, there is a sense that indexes still have some way down to go before they find a bottom, with economic data suggesting economies are beginning to feel the pinch.
Cleveland Fed chief Loretta Mester added to the worry, saying that the risk of a recession in the United States was increasing and it would take several years to bring inflation down from four decade highs to the bank’s two percent target.
She told CBS’s “Face The Nation” on Sunday that while she was not predicting a contraction, the Fed’s decision not to act sooner to fight rising prices was hurting the economy.
In early trade, Asian traders were struggling, with Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Seoul, Taipei, Jakarta and Wellington all in the red.
Analysts warned there was likely to be more pain ahead for traders as the Ukraine war drags on and uncertainty continues to reign.
“Central banks’ hawkish rhetoric and concerns over a global economic slowdown/recession (are) not helping sentiment and at this stage it is hard to see a turn in fortunes until we see evidence of a material ease in inflationary pressures,” said National Australia Bank’s Rodrigo Catril.
And Stephen Innes of SPI Asset Management added: “Most of these major central banks are praying for some relief from inflation and hoping the data falls in line, but unless there is a detent in the Ukraine -Russia war, escalation will continue to drive energy price fears so it could be a tough road ahead.”
Still, oil prices fell further Monday after suffering a hefty drop Friday caused by demand worries caused by a possible recession.
However, US Energy Secretary Jennifer Granholm said prices could continue to surge if the European Union cuts off imports of the commodity from Russia in response to the Ukraine war.
She said Joe Biden had called on global suppliers to ramp up output to help temper the price rises, with the president to discuss the issue at an upcoming visit to Saudi Arabia next month.
