Stocks, lower oil and dollar gains amid recession fears

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Stocks and crude prices fell, while the dollar held at multi-year highs on Wednesday as fears of recession mount, while traders are also increasingly concerned about tensions with the Russia after it declared victory in controversial polls over Ukraine's annexation.

Investors are also keeping a close eye on London, after new Finance Minister Kwasi Kwarteng's mini-tax cut budget last week sent shockwaves through markets, pushing the pound to a high. record high and causing serious warnings for the UK economy.< /p>

While Asia posted weak gains on Tuesday, New York and Europe ended in the red again, as Wall Street was rocked by data showing a surprise improvement in US consumer confidence – likely due from a drop in gas prices - and a jump in home sales.

The figures underscored the resilience of the world's largest economy despite three successive bumper rate hikes by the Federal Reserve - and expectations of another in November - as it tries to rein in four-high inflation decades.

Several Fed officials lined up this week to reaffirm their determination to keep rising until prices are brought under control, even at the cost of a recession.

Observers are now betting that borrowing costs will hit around 4.75% next year, and some policymakers have suggested they could stay high for some time.

The prospect of such tight monetary policy hurt stocks as yields on 10-year U.S. Treasuries — an indicator of future rates — hit 4% for the first time since 2010.

The Dow and S&P 500 ended lower on Tuesday, although the Nasdaq edged higher.

Asia resumed its bearish trend on Wednesday, with Hong Kong down more than 3%, while Seoul, Taipei and Manila fell more than 2%. Tokyo, Shanghai and Singapore lost more than one percent.

There were also losses in Sydney, Wellington and Mumbai.

London, Paris and Frankfurt have all opened their doors.

– Russia nuclear alert –

The dollar remains the benchmark as the Fed leads the way for central bank tightening.

"The fact that we have such a strong increase in US yields is attracting flows into the US dollar," said Nannette Hechler-Fayd'herbe, of Credit Suisse Group AG.

"Until monetary and fiscal policy around the world really comes to bolster their own currencies, we should expect a very strong dollar."

The greenback rose against the pound as the British currency was battered by fears that Kwarteng's spending plan could increase borrowing just as the Bank of England tried to raise rates to fight inflation, causing consternation to many observers.

The dollar was also approaching 145 yen, having fallen from a high near 146 yen after the Japanese government intervened last week to support its currency.

Sentiment was also shaken by concerns over developments in Ukraine, after Kremlin-installed authorities in four Russian-held regions claimed victory in annexation votes, with Moscow warning it could use nuclear weapons to defend territories.

Ukraine and its allies have denounced the so-called referendums as a sham, saying the West will never recognize the results.

In response, Kyiv on Wednesday called on the West to "significantly" increase its military aid to Ukraine.

But former Russian leader Dmitry Medvedev, an ally of President Vladimir Putin and now deputy chairman of the country's security council, issued a stark warning that Moscow was ready to act decisively.

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“I want to remind you - the deaf who only hear themselves: Russia has the right to use nuclear weapons if necessary,” he said on social media.

In crude markets, the two major contracts were down more than 1% on recession concerns and, according to Bloomberg, citing sources, US inventories rose by more than four million pounds. barrels last week.

The drop comes despite a report that Moscow is calling on OPEC and other major groups to cut production by a million barrels a day when they meet next week.

– Key figures around 07:20 GMT –

Tokyo – Nikkei 225: 1.5% drop to 26,173.98 (close)

Hong Kong - Hang Seng Index: -3.6% down to 17,215.07

Shanghai Composite: DOWN 1.6% to 3,045.07 (close)

London – FTSE 100:

Pound/Dollar: DOWN to $1.0671 from $1.0730 on Tuesday

Euro/Dollar: DOWN to $0.9556 from $0.9595

Euro/Pound: UP to 89.55 pence from 89.39 pence

Dollar/yen: DOWN to 144.72 yen from 144.81 yen

West Texas Intermediate: DOWN 1.4% to $77.40 a barrel

Brent North Sea Brent: 1.3% down to $85.15 a barrel

New York – Dow: DOWN 0.4% to 29,134.99 (closing)

AFP

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