The FTSE 100 and European stocks have lost ground at the open as mounting energy and inflation troubles fuel fears of a recession.
London’s blue-chip index drop followed falls in the US on Tuesday and Asia overnight and with little corporate or economic news to provide direction.
Attention now turns to tomorrow’s start of the Jackson Hole economic symposium in Wyoming, with Federal Reserve chairman Jerome Powell due to make comments on US monetary policy on Friday.
Richard Hunter, head of markets at interactive investor, said: “With investors for the most part sitting on their hands ahead of the imminent Jackson Hole symposium, markets failed to make much progress.
“The changing narrative among investors is that even if the Fed succeeds in engineering a soft landing for the US economy, rates could remain at elevated levels for longer, and until such time as the battle with inflation has been beaten beyond a doubt.”
Neil Wilson, chief market analyst at markets.com, reiterated that all eyes are on Powell.
He said: “All anyone is really talking about is Jackson Hole and what Jay Powell says…it’s hard to see him doing anything different – underling the case to fight inflation, that policy rates will need to stay restrictive for longer etc… quite how the market reads it is anyone’s guess. But the market, as evidenced by nominal Treasury yields and breakevens, is still under-appreciative of just how much inflation-busting is required.”
Meanwhile, Brent crude (BZ=F) is back at $100/barrel for the first time in over a week last night, after Saudi Arabia dropped a heavy hint that the Opec group could cut production.
David Madden, market analyst at Equiti Capital, suggests any Opec move could depend on the progress of nuclear talks with Iran.
He said: “WTI and Brent crude are powering ahead as OPEC+ announced that it might consider cutting oil production, if or when, Iran boosts its output.
“Western governments are engaging in talks with Iran about its nuclear programme, it is understood that little progress has been made, so OPEC might not be forced to act.”
In Asia, Tokyo’s Nikkei 225 (^N225) lost 0.49% to finish at 28,313 while the Hang Seng (^HSI) in Hong Kong fell 1.19% to 19,270. The Shanghai Composite (000001.SS) also finished in the red, slipping 1.85% to close at 3,215 points. The latest market slide comes as investors grapple with uncertainty over when the highest inflation in decades will ease significantly.
“Despite the best efforts of data releases, US rates markets just do not want to fundamentally re-price the outlook until Chair Powell’s remarks this Friday at Jackson Hole,” Jim Reid from Deutsche Bank, said.
Watch: What is a recession and how do we spot one?