Stocks showed a slight decline as investors expressed concern over the possibility of major central banks maintaining a hawkish stance amidst lingering inflation worries. Meanwhile, the price of Brent crude oil continued to rally, surpassing $95 a barrel for the first time since November.
In Europe, energy stocks provided a ray of light, with TotalEnergies SE, BP Plc, and Shell Plc leading the gainers in the weaker regional Stoxx 600 benchmark. US equity futures remained relatively unchanged, while Asian stocks experienced minor losses.
The surge in oil prices, driven by supply constraints from Saudi Arabia and Russia, has put pressure on central bankers globally as they attempt to combat rising prices. This week, the Federal Reserve, Bank of England, and Bank of Japan will set policies.
Deutsche Bank AG macro strategist Jim Reid highlighted the persistent rise in oil prices as the main story at the start of this pivotal central bank week. As inflationary pressures become more evident, investors have begun pricing in the possibility that interest rates will remain higher for an extended period.
In the United States, Treasury yields have risen, and the dollar has also shown slight gains against most major currencies. Market participants are particularly interested in the dot plot summary of economic forecasts, which will be released by the Federal Reserve. This summary will provide insight into whether policymakers anticipate another 25 basis-point rate hike by the end of the year and how much easing they project for 2024. Previous projections in June anticipated a one percentage point cut.
Further news from developers Country Garden Holdings Co. and Sunac China Holdings Ltd. failed to lift sentiment in Asia. While Country Garden received bondholder approval for extending repayments on local notes, and Sunac obtained creditors’ approval for its debt restructuring scheme, positive market sentiment was not significantly affected.
The BlackRock Investment Institute downgraded its rating for emerging-market equities to neutral from overweight, citing China’s struggling property sector as an ongoing drag on growth. The institute’s strategists highlighted that policy stimulus is not as extensive as in the past.