Key Points:

• Stocks Retreat, Dollar Gains as Uncertainty Looms
• Asian equity futures decline after US shares close lower
• OPEC+ production cuts to intensify fight against inflation

Asian stocks are primed to open lower on Thursday after investors retreated from US and European shares in a risk-off move that reflected worries lower oil production would make the job of curtailing inflation even harder.

Equity futures for Hong Kong and Australia fell, echoing the decline in the S&P 500 after a whipsawing session on Wednesday and a drop for European blue chips. Japanese futures traded flat. Investors scurried back to the dollar, which enjoyed its biggest jump in a week. A decline in the pound accelerated after Fitch Ratings downgraded its UK outlook to negative.

The caution followed a decision by OPEC+ on Wednesday to reduce daily oil production by two million barrels, sending the US oil benchmark to a three-week high. The White House warned about negative effects on a global economy weathering curbs on Russian imports and said the US would release 10 million barrels from strategic reserves.

Upward pressure on energy prices threatens to prolong above-target inflation, dashing hopes that central banks may soon relent from aggressive interest rate increases. Investors will remain keenly focused on US jobs data on Friday for further clarity.

Federal Reserve Bank of Atlanta President Raphael Bostic said on Wednesday he favored raising interest rates to 4.5% by the end of the year, implying a further 125 basis points of tightening. His San Francisco counterpart Mary Daly warned against expecting any rate cuts in 2023.

“Inflation fears may get assuaged but then they turn into growth fears and that turns into a problem for corporate earnings,” said Emily Roland, co-chief investment strategist for John Hancock Investment Management, in an interview with Bloomberg TV. “Even if rates do fall it’s probably too early to call the all-clear on stocks.”