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Stocks Slip, Dollar Rises as US Rate Hikes Seen

Oct. 10, 2022
Oil prices meanwhile fell after the biggest weekly gain since March that followed a decision by OPEC and allied producers led by Russia to slash crude output by two million barrels per day.

Global stocks slid on Monday as investors braced for more large interest rate hikes from the Federal Reserve.

The prospect of higher yields on debt was a boon for the dollar, however, which gained on its main rivals.

"We're seeing mild risk aversion in the markets at the start of the week, perhaps some apprehension ahead of what could be a big few days for the U.S.," said market analyst Craig Erlam at OANDA.

Last week closed out with news that the U.S. firms created a net 263,000 jobs in September.

While that was down from August it was more than expected, indicating that the U.S. economy is not yet slowing considerably and inflationary pressures likely remain.

That sent stocks sharply lower as it means the Fed is unlikely to relent on interest rate hikes that are meant to tame inflation.

Stocks took a beating in August and September as monetary policymakers made clear they would keep raising interest rates in order to bring down inflation, even at the cost of a recession.

Last week, however, they briefly rallied on hope that the U.S. jobs data would show the economy is already slowing, meaning the Fed could relent on interest rate hikes.

Some investors "may still be hoping that this week's inflation data will swing the central bank but given previous comments, that doesn't appear realistic unless we see a significant miss to the downside," added Erlam.

Adding to the stress is the upcoming corporate earnings season, which many fear will show that companies are feeling the pain of tightening monetary policies.

Elsewhere on Monday, the Moscow stock exchange plunged nearly 12% following a weekend explosion that partially destroyed the bridge connecting Crimea to Russia.

Meanwhile, the pound won little support from Britain ramping up efforts to calm markets after a heavily criticized budget.

In what was seen as coordinated action, the government brought forward the release date of key economic forecasts and the Bank of England boosted liquidity.

"With the pound remaining weak and (UK) government borrowing costs inching up again towards worrying levels, the UK government and the Bank of England have launched a two-pronged attempt to calm markets," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Oil prices meanwhile fell after the biggest weekly gain since March that followed a decision by OPEC and allied producers led by Russia to slash crude output by two million barrels per day.

The drop Monday came also on demand concerns caused by China's Covid flare-ups and more weak data out of Beijing owing to lockdowns.

Copyright 2022, Agence France-Presse

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