NEW YORK/LONDON, Jan 22 — Risk aversion dominated markets yesterday as stocks slumped on Wall Street and in Europe, oil prices fell from seven-year highs earlier in the week and bond prices surged with traders scurrying for the relative safety of government debt.
Data, however, won’t begin to show an expected slower pace of rising consumer prices for at least a few months, making Fed Chair Jerome Powell’s job more difficult as he tries to calm markets. In Europe, the German, French and Italian indices fell almost 2 per cent, with the broad Euro STOXX index of 600 leading regional companies closing down 1.84 per cent. MSCI’s all-country world index fell 1.74 per cent.
“By the time we get to the second rate hike, everything will be rolling over enough that everybody will back off from these calls,” he said. “The growth numbers will be slowing much more quickly than the Fed anticipated.” Markets overnight in Asia were broadly lower, including in China where benchmark mortgage rates were cut on Thursday in the latest move to prop up an economy soured by its property sector.