Equities flash red, central banks and gold in focus
15th September
Key takeaways
Global equities fell Tuesday amid oil-driven inflation fears.
Brent crude topped $108 a barrel, up 19% this month.
Three central banks, the Fed, BOJ, and BOE all weigh in this week.
Lukman Otunuga
Head of Market Research
Global equities flashed red on Tuesday as elevated oil prices dented risk appetite.
Asian markets ended mostly lower, European shares extended losses, and US equity futures pointed to a negative open amid the prospect of higher interest rates.
Oil benchmarks remain supported by supply-side shocks as a critical Saudi Arabian pipeline stays offline. With Brent topping $108 a barrel, gains for September alone stand near 19%, taking this year's rally to almost 80%. Higher oil prices are set to fuel inflationary pressures, which in turn may support the case for higher interest rates.
A super central bank combo featuring the Federal Reserve, Bank of England, and Bank of Japan may inject significant volatility into FX markets.
On Wednesday, the Fed is expected to hike rates for the first time since July 2023. With markets currently pricing a 90% chance, much focus will be on the dot plot and the press conference from Chair Kevin Warsh. A rate hike may support the dollar, though the longer-term outlook will depend on any signals offered on future moves.
The BOJ is set to extend interest rates to a fresh three-decade high. The central bank was already leaning toward a hike, then Scott Bessent got involved, stating he expects Governor Ueda to "do the right thing." A rate hike may support the yen, weighing on USDJPY.
Gold extended losses amid rising oil prices and growing bets on higher US interest rates. The precious metal is trading near $4,300 ahead of Wednesday's Fed decision. With 10-year Treasury yields near their highest level in almost two decades, this may compound the pressure on zero-yielding gold, which is already contending with a stronger dollar. Sustained weakness below $4,300 may open a path toward $4,200.
Frequently asked questions
Rising oil prices are fuelling inflation fears, reinforcing the case for higher rates and denting risk appetite.
Markets price a 90% chance of a hike Wednesday, the first since 2023 - with focus on the dot plot and Chair Warsh's guidance on future moves.
Rising yields and a stronger dollar are pressuring non-yielding gold, with a break below $4,300 risking a slide toward $4,200.
