SINGAPORE/HONG KONG – Stock markets slid on Wednesday and the dollar held firmly to its recent gains as investor sentiment was hurt by poor economic data from around the world and fading hopes for a less aggressive pace of central bank interest rate hikes.
The pan-European stocks index STOXX 600 touched a four-week low and was last down 0.2 percent while Britain's FTSE lost 0.9 percent, continuing the softness in Asian shares from earlier in the day.
US S&P 500 futures shed 0.3 percent.
Wednesday is fairly quiet on the data front, but poor economic activity reports the previous day from the euro zone – which reported a contraction for a second straight month – the United States and Japan, continued to hurt appetite for riskier assets, such as stocks.
Investors' attention is also turning to the central banker's Jackson Hole Symposium which begins on Thursday, with Friday's remarks from Fed chair Jerome Powell a particular focus.
Recent market moves were due to "the combination of the Fed and central banks sticking with their inflation mandate, and at the same time the latest economic indicators showing signs of weakness not just in Europe, but also in the US and also in Japan," said Tai Hui, chief market strategist for Asia at JPMorgan Asset Management.
European benchmark gas prices tripling in a little over two months, have not helped either.
"Maybe two or three weeks ago, markets were thinking the Fed may be done with hiking rates by the end of this year and cutting rates in 2023, and that sequence of events now doesn't look like it's happening," Hui said, noting this had pushed the yield on US benchmark 10 year treasuries back above 3 percent early in this week.
Traders have been raising their expectations on where the Fed funds rate might peak, with current pricing pointing toward around 3.7 percent in the middle of 2023.
The US 10 year yield was last 3.0499 percent while German 10-year government bond yield touched a fresh 8-week high of 1.38 percent.
The US dollar, which has gained support from higher interest rate expectations, has also benefited from the poor comparative outlook in other parts of the world.
On Wednesday, the euro was trading at $0.9956 after falling as far as $0.99005 on Tuesday, and was also struggling against sterling at 84.14 pence, despite the pound's own difficulties.
Oil recovered from early losses. Brent crude futures rose 0.7 percent to $100.9 a barrel – still affected by talk of Saudi supply cuts. US crude futures gained 1 percent to $94.75.
Spot gold held steady at $1,747 an ounce. Bitcoin still beared the scars from a sudden slide at the end of last week, parked at $21,300.