Wall Street’s key indices closed lower after Federal Reserve Chair Kevin Warsh reiterated the central bank’s focus on fighting inflation, increasing prospects for a rate hike.

Without confidence that inflation is heading clearly and with sufficient speed to the Fed’s 2% goal, the central bank would have “more work to do,” Mr Warsh said in his first Jackson Hole speech to fellow central bankers.

That saw early gains in US equities fade, while European markets had already closed and finished the session with handy gains.

S&P 500: -0.25%Dow: -0.02%Nasdaq: -0.5%Eurostoxx 600: +0.5%

ASX 200 futures trading closed on Saturday morning (AEST) pointing to a 0.4% decline today.

However, the S&P 500 still gained 0.5% over the week, while the ASX 200 picked up 0.4% snapping a two-week losing streak.

The Nasdaq was hit by a 4.3% drop in Nvidia shares and Marvel Technology fell more than 10%, however the megacaps Alphabet (+1.7%) and Apple (+1.6%) made solid gains.

Traders added to bets on a September rate hike after Mr Warsh also said he felt recent inflation data did not suggest a change in trend.

After the comments, bets that rates would be raised at the September meeting rose to a 56% probability from 35% on Thursday, according to CME Group’s FedWatch tool.

Three Fed officials have already warned about sticky inflation, but Mr Warsh had previously resisted giving forward guidance on the path of interest rates.

“The crisp mountain air of the Grand Tetons may have helped bring clarity of speech to Fed Chair Warsh, who marked his 100th day in the job by offering seven principles to navigate by,” NAB’s Head of Rates Strategy Ken Crompton wrote in a note this morning. 

“He gave no undertaking as to where the path ends — but left no doubt that underlying inflation trends are bringing him no comfort: the Fed must be confident inflation is heading to target ‘clearly and at sufficient speed. Otherwise, we have work to do.'”

Traders are now split between a rate hike and a hold in September, as they were before inflation data this month painted a mixed picture.

“Why the market is modestly reacting is he (Warsh) is very adamant that the 2% inflation target is going to remain. He is reiterating the hawkishness, but in a more of a consistent way than an incremental way,” chief market strategist for Nationwide, Mark Hackett told Reuters

“There’s been somewhat misguided thoughts among investors that this would soften a little bit. Clearly, that’s not the case.”

MSCI’s gauge of stocks across the globe slipped 0.1% on Friday, while the pan-European STOXX 600 index gained 0.5%.

In the bond market, the 2-year note, which typically moves in step with Fed interest rate expectations, rose sharply 12.79 basis points to 4.36%.

The yield on benchmark U.S. 10-year notes rose 5.6 basis points to 4.728%, while the 30-year bond yield rose 2.19 basis points to 5.2129%.

In foreign exchange markets, the US dollar jumped against other major currencies and was on track for its biggest daily climb in more than 2 months on the prospect of rising rates.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.6% to 99.71, although the Aussie dollar remained relatively unmoved at 71.58 US cents, just below its four-month high.

The Aussie was the best performing of all G10 currencies against the US dollar last week.

Oil slipped a tad on rumours that the Strait of Hormuz would soon reopen to shipping.

Gold fell more than 3% as the US rate-hike expectations spread. Silver fell 4%.

With Reuters