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Oil fell near $94.00 due to Fed’s tough stance

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  • Asian indices are trading in deep red ahead of the latest rate hike cycle.
  • The Fed’s preference for putting price stability over growth prospects has dampened the risk-off mood.
  • Oil prices have corrected their recent losses and climbed up to around $94.00.

Markets in the Asian region are underperforming as the indices have fallen like a deck of cards. Addressing the world economy at the Jackson Hole Economic Symposium on Friday, the Federal Reserve chose price stability over growth as indices witnessed a sharp sell-off.

As of press time, Japan’s Nikkei225 was down 2.66%, China A50 by 1%, Hang Seng 0.76% and Nifty 50 down 1.40%.

Given the price pressure in the US economy, the inflation rate is 8.5% and the Fed is on a spree to hike interest rates. There is no doubt that the liquidity crunch has had a significant impact on US growth rates, but price stability calls for a drastic sacrifice from growth rates and job creation. And, its pain is visible on Asian equities.

Meanwhile, the Chinese economy is facing the headwinds of a resurgence in COVID-19. Reuters headlines that China has reported 1,344 new asymptomatic coronavirus cases in the mainland on August 28 versus 1,137 a day earlier, raising fears of a lockdown to curb the spread. This has raised fears of a slowdown in the Chinese economy as restrictions on the movement of men, materials and machines will halt production processes.

On the oil front, oil price reversed strongly and climbed up to around $94.00. Investors are betting on supply issues amid OPEC’s announcement of a production cut to correct the recent fall in prices. Instead of focusing on denting global growth prospects before the new rate hike cycle.

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