ASX 200 tipped to fall after Fed chairman Jerome Powell’s hawkish rate remarks

The local sharemarket is on track to fall 1.5 per cent at the open after US Federal Reserve chairman Jerome Powell pledged to continue the fight against inflation.

The local sharemarket will also home in on annual earnings results from Fortescue Metals, due for release before the market opens. Picture: AAP

The local sharemarket is on track to fall 1.5 per cent at the open after US Federal Reserve chairman Jerome Powell pledged to continue the fight against inflation, even at the expense of economic growth.

Mr Powell’s hawkish speech, at highly anticipated Jackson Hole summit of central bankers, sparked alarm on Wall Street as it doused hopes the central bank might pull back on its aggressive policy tightening.

The Dow Jones slid 3 per cent, or 1008.38 points, to 32283.4 – its biggest one-day fall since May – as investors factored in a higher-for-longer path of interest rate hikes.

The S&P 500 Index dropped 3.4 per cent to 4057.66, and the tech-heavy Nasdaq plunged 3.9 per cent to 12141.71.

Modest signs of slowing in the world’s largest economy and easing price pressures had spurred expectations that the central bank might ease up on its aggressive interest rate hikes, and perhaps even start to reverse course next year.

But Mr Powell poured cold water on those bets, making it clear that Fed policy and the benchmark borrowing rate would have to remain “sufficiently restrictive” to return inflation to its 2 per cent target.

“While higher interest rates, slower growth, and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses,” he said.

“But a failure to restore price stability would mean far greater pain.”

The European Central Bank brought a similar message from across the Atlantic, with Governing Council member Francois Villeroy de Galhau telling Jackson Hole the bank would act with “determination” to avoid “unnecessarily brutal” interest rate hikes later on.

The US dollar lost ground against the euro on the speeches, but rose against the yen and pound. The Australian dollar dipped from a high above US70c overnight on Friday to US68.97c by the close of trade on Saturday (AEST).

Brent crude ticked up to $US100.99 in a move set to support ASX-listed energy stocks on Monday.

Meanwhile, the local sharemarket will also home in on annual earnings results from Fortescue Metals, due for release before the market opens.

Forecasts from analysts surveyed by Bloomberg centre on EBITDA of $US10.49bn, down from $US16.38bn the year before, with revenue tipped to slip to $US17.38bn from $22.28bn.

Mineral Resources, Liberty Financial, A2 Milk and Adore ­Beauty are also among companies set to report their annual figures on Monday.

The Australian Bureau of Statistics is due to hand down retail trade figures for July, with economists forecasting growth of 0.3 per cent in the month, up from 0.2 per cent in June.

Additional reporting: Dow Jones newswires