Stock markets fall as traders prepare for the big week

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LONDON — Stock markets in Asia and Europe fell on Monday at the start of a key week for stocks as the Federal Reserve prepares to raise interest rates again and some of the world’s biggest companies issue reports. profits.

With the U.S. central bank expected to raise borrowing costs by 75 basis points, traders will be looking at policymakers’ views on the outlook for the world’s largest economy as they try to contain inflation while by promoting growth.

The decision comes a day before the release of second-quarter gross domestic product data, with some observers warning it could show a second successive contraction, seen as a technical recession.

All three major Wall Street indexes ended last week with a loss, ending a three-day rally, following a major lack of data in the crucial services sector.

Asia and Europe fared somewhat better, with Tokyo, Hong Kong, Shanghai, Sydney, Taipei, Mumbai, Manila, Jakarta and Wellington all in the red, while London, Paris and Frankfurt fell in the early trades.

There were small gains in Singapore, Bangkok and Seoul.

Investors are also awaiting earnings releases from business titans Apple, Amazon and Alphabet, Google’s parent company.

The numbers will provide a clearer picture of the impact of soaring inflation and rising interest rates on consumer spending and business results.

But analysts remain cautious about the outlook as the focus of trading floors shifts from rising prices to economic growth, with some saying a slowdown could allow banks to ease monetary tightening.

Fed chiefs have previously said their top priority is to bring inflation down from four-decade highs, even at the expense of growth.

“We still see further decline for risky assets as recession fears mount and central banks remain determined to fight inflation at the expense of growth,” said Standard Chartered strategist Eric Robertsen.

And Stephen Innes of SPI Asset Management added: “As rising jobless claims, falling home sales and accumulating gasoline inventories show that Fed rate hikes are causing a slowdown and get inflation under control, the question is at what price.”

Others warned that while inflation may start to subside, the Fed could still push borrowing costs to around 5% and is unlikely to cut rates as soon as many traders expect. .

The economic slowdown – and the expected impact on demand – continues to put pressure on oil prices, with both major contracts down sharply on Monday.

Crude gave up most of the gains seen since Russia invaded Ukraine, and Vandana Hari of Vanda Insights said it suffered further losses.

“Although prices have been volatile, I expect further downward pressure on crude,” she said, adding that the Fed’s decision “will likely serve as yet another reminder of the economic headwinds at come”.

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