Global stocks fall as inflation bodes for Fed rate hikes
BANGKOK – Stocks were mostly weaker in Asia on Thursday after the latest report on soaring prices in the United States appeared to keep the Federal Reserve on track to raise interest rates in the coming months.
London, Paris, Tokyo and Shanghai were down while Sydney and Hong Kong were up.
The spike in coronavirus cases has heightened uncertainty about the pace of recovery from the pandemic.
Britain and Germany have suffered severe waves of the highly contagious omicron variant of the coronavirus. France is at the epicenter of Europe’s ongoing fight against COVID-19, with new infections exceeding 360,000 a day in recent days.
The German DAX fell 0.2% to 15,973.58 while the CAC 40 in Paris fell 0.6% to 7,196.23. In Britain, the FTSE 100 fell 0.3% to 7,533.13. On Wall Street, S&P 500 and Dow Industrials futures were down less than 0.1%.
In Asia, the omicron variant has swept australia and is gaining traction in other countries despite high vaccination rates, mask requirements and strict border policies. Japan reported more than 13,000 new infections on Wednesday, the highest level in four months. China, including zero COVID policies are questioned by epidemics a few weeks before the Beijing Winter Games, tests and in some cases locks entire cities.
Tokyo’s Nikkei 225 fell 1% to 28,489.13, while the Shanghai Composite lost 1.2% to 3,555.26. In Seoul, the Kospi fell 0.4% to 2,962.09.
The Hang Seng in Hong Kong edged up 0.1% to 24,429.77 and the S&P/ASX 200 in Australia added 0.5% to 7,474.40. The Indian Sensex edged down 0.1%.
Taiwan’s benchmark rose 0.3% after TSMC, the world’s largest contract maker of computer chips, reported record quarterly profit of just over $6 billion.
The 10-year Treasury yield remained stable at 1.74%.
Besides the direct impact of large coronavirus outbreaks on normal business activity, spillover effects on manufacturing and shipping could still hamper a rebound from the past two years of disruptions.
“So far, market reaction to the omicron wave has been muted, but attention should be paid to concerns about other impacts on global supply chains that could trigger risky trading,” Anderson said. ActivTtrades alves in a report.
On Wednesday, the S&P 500 rose 0.3%; the Dow Jones Industrial Average gained 0.1% and the Nasdaq composite rose 0.2%. The Russell 2000 Index fell 0.8%.
Investors zeroed in on a Labor Department report, which showed consumer prices jumped 7% last month. This is the fastest annual pace of the consumer price index in nearly four decades. The sharp increase, which was in line with economists’ forecasts, came a day after Fed Chairman Jerome Powell told Congress that the central bank was ready to raise rates to fight inflation.
Wall Street has been closely monitor rising inflation to gauge the impact on businesses and consumers, as well as the Fed’s plan to reduce its support for the economy and the markets.
Companies in many sectors passed the higher costs on to consumers, but warned they would still feel a financial hit due to rising prices and supply chain issues.
Wall Street will get another update on rising inflation on Thursday, when the Labor Department releases December results for an index based on U.S. wholesale prices. It shows how inflation affects costs for businesses.
Investors are also watching the latest round of earnings closely to see how companies are handling inflation.
Delta Air Lines releases its results on Thursday. Citigroup, JPMorgan Chase and Wells Fargo announce their results on Friday.
In other trading on Thursday, the benchmark U.S. crude oil fell 19 cents to $82.45 a barrel in electronic trading on the New York Mercantile Exchange. It gained $1.42 to $82.64 a barrel on Wednesday.
Brent crude, the basis for international oil pricing, fell 15 cents to $84.52 a barrel.
The US dollar fell to 114.58 Japanese yen from 114.64 yen. The euro fell from $1.1444 to $1.1469.
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