HONG KONG: Stocks fell on Wednesday ahead of what many expect to be a third straight hefty interest rate hike by the Federal Reserve (Fed), while the dollar hit fresh multidecade highs against the pound and euro after Moscow stepped up its invasion of Ukraine.
Equities around the world have been clattered by fears of a recession in major economies as central banks ramp up borrowing costs to combat the highest inflation in decades, which has been compounded by the war in Ukraine and supply chain snarls.
In Washington, the Fed is due to conclude its latest policy meeting, with most analysts predicting it would announce another 75-basis-point lift, though some have tipped a full percentage-point move.
However, while the hike has largely been priced into the markets, the United States central bank's forecast and post-meeting comments from Chairman Jerome Powell are the main attraction for investors.
"Volumes remain light and the mood cautious, with few looking to take on large positions before hearing what the Fed says and where policymakers see rates going by the end of the hiking cycle," Fiona Cincotta of City Index said.
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"This is what will drive the markets, not the rate hike... but what the Fed plans to do next," she added.
Fed officials have for months stuck to the mantra that they would only ease up on their hawkish drive when inflation comes down and remains subdued.
This has led many to warn that rates are unlikely to come down anytime soon, possibly as late as 2024, with a recession more than likely in the US, as well as other major economies.
Other central banks are also meeting this week. On Tuesday, officials in Sweden surprised markets by unveiling a one-percentage-point hike, while the United Kingdom and Switzerland are expected to announce more increases.
Asian markets were back in the red, reversing Tuesday's bounce.
Tokyo, Hong Kong, Sydney and Manila were all down more than 1 percent, while there were also losses in Shanghai, Seoul, Singapore, Wellington, Taipei, Mumbai and Jakarta.
London rose in early trade, but Paris and Frankfurt were down.
Adding to the dour mood was Russian President Vladimir Putin's announcement of a "partial mobilization" as he upped the ante in his battle against Ukraine after his forces were routed from several of its cities in recent weeks.
He added that he would annex the territories his forces have already occupied and backed weekend referendums in four regions in Russian-held parts of Ukraine.
"We will definitely use all means available" to protect Russian territory, he warned, adding: "That's not a bluff."
The moves mark an escalation of the seven-month war, which has roiled markets and sparked an energy crisis.
Oil prices, which have wilted in recent months owing to worries about demand caused by any recession, surged more than 2 percent.
And the dollar — a safe haven in times of uncertainty and turmoil and which was already elevated ahead of the rate decision — rallied further.
It hit a fresh 37-year high of $1.1305 against sterling and a new 20-year peak of $0.9885 per euro.