Macro Roundup (Sep 26)

SHANGHAI, Sep 26 —This is a roundup of global macroeconomic news last Friday and what is expected today.

The euro and sterling slumped against the dollar on Friday after surveys showed the downturn in business activity across the euro zone and Britain deepened this month and the economies were likely entering a recession.

Also weighing on sterling, Britain’s new finance minister Kwasi Kwarteng announced tax cuts and household and corporate support measures and the UK debt office laid out plans for 72 billion pounds ($79.74 billion) of additional issuance for this financial year to fund the stimulus.

Sterling was set for its biggest weekly decline against the U.S. dollar in two years after it touched a fresh 37-year low of $1.1051. At 1048 GMT it was down 1.72% at $1.1062.

British bond yields were set for their biggest daily rises in decades.

U.S. equity futures were lower Sunday evening after surging interest rates and foreign currency turmoil pushed the major averages to near their lows of the year.

Dow Jones Industrial Average futures fell 0.55%. S&P 500 futures also fell 0.61% and Nasdaq 100 futures dropped 0.65%.

Investors were reacting to the Federal Reserve’s commitment to its rate hiking plan to help tame inflation. At the conclusion of the FOMC meeting, chair Jerome Powell said the central bank could raise rates as high as 4.6% before pulling back. The forecast also shows the Fed plans to stay aggressive this year, hiking rates to 4.4% before 2022 ends.

Bond yields soared after the Fed enacted another rate hike of 75 basis points. The 2-year and 10-year Treasury rates hit highs not seen in over a decade. On Friday, Goldman Sachs slashed its year-end target for the S&P 500 to 3,600 from 4,300.

Oil prices plunged about 5% to an eight-month low on Friday as the U.S. dollar hit its strongest level in more than two decades and on fears rising interest rates will tip major economies into recession, cutting demand for oil.

Brent futures were down $4, or 4.4%, to $86.46 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $4.45, or 5.3%, to $79.10.

That puts both benchmarks into technically oversold territory and WTI on track for its lowest close since Jan. 10 and Brent on track for its lowest close since Jan. 13.

Gold prices dropped over 1.5% to their lowest since April 2020 on Friday, hurt by an unrelenting rally in the U.S. dollar and Treasury yields as the Federal Reserve adopts a more aggressive stance to check surging inflation.

Spot gold was down 1.6% at $1,643.51 per ounce after dropping as much as 1.8% to $1,640.20 earlier in the session.

U.S. gold futures fell 1.8% to $1,651.

The Stoxx 600 fell 2.3%, with all sectors and major bourses trading in the red.