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Stocks suffer as Fed heightens recession fears, BoJ warns of risks ahead

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Stocks suffer as Fed heightens recession fears, BoJ warns of risks ahead

Stocks suffer as Fed heightens recession fears, BoJ warns of risks ahead

World equity markets slumped on Thursday after the Fed dashed investor hopes of a more dovish policy outlook even as signs grow that global economic growth is stuttering.

As David Pollard reports, the Bank of Japan has also warned of heightening risks to the economic outlook and the Bank of England is expected to warn later about the potential impact of a no-deal Brexit.

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Stocks suffer as Fed heightens recession fears, BoJ warns of risks ahead

Two central banks, two different stories .... First the Fed - sending markets into a spin with a more hawkish, more upbeat outlook than many expected.

And then the Bank of Japan - hinting at the opposite.

While on hold now, policy there may have to be more accommodative in the future.

SOUNDBITE (Japanese) BANK OF JAPAN GOVERNOR, HARUHIKO KURODA, SAYING: "There are more downside risks to Japan's economy.

We especially need to pay attention to the China-U.S. trade war." (UPSOT) (English) U.S. FEDERAL RESERVE CHAIRMAN, JEROME POWELL, SAYING: "Most of my colleagues expect the economy to continue to perform well in the coming year ..." The BoJ's warning - and the many others like it over recent months - is exactly why the Fed's latest action came as a shock.

Its quarter point rate hike priced in - but not the two hikes its latest forecasts imply for next year.

That's triggered a broad-based sell off in stocks - some Asian indices now slipping into bear market territory ... US bond yields fell hard too - on a fear further Fed tightening could suffocate growth.

(SOUNDBITE) (English) RICHARD HUNTER, HEAD OF MARKETS, INTERACTIVE INVESTOR, SAYING: "Markets are currently pricing in is one rate hike maximum during the course of 2019 ... Whilst the US economy has been in a very strong place in 2018, U.S. markets have actually taken a hit.

The S&P 500 for example is now down 10 percent in the year to date." To complete a trio, the Bank of England left rates on hold on Thursday.

There was little surprise over that - policymakers warning that Brexit uncertainty had 'intensified considerably'.

(SOUNDBITE) (English) RICHARD HUNTER, HEAD OF MARKETS, INTERACTIVE INVESTOR, SAYING: "There's certainly no expectations of an immediate rate hike.

That being said of course the UK economy has shown some resilience.

Some would argue that if it hadn't been for the Brexit uncertainty it would have seemed rather more GDP growth than it has." The latest UK figures show Black Friday helped retail sales volumes jump by far more than expected in November.

Though even as they were released, economists spoke of a rare bright spot.




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