World Shares Track Wall St Retreat on Interest Rate Worries
BANGKOK (AP) -- World shares were mixed Thursday after a retreat on Wall Street spurred by comments indicating the Federal Reserve intends to more aggressively tackle inflation.
Benchmarks rose in Paris and Frankfurt after declines in most Asian markets. U.S. futures fell while oil prices were higher.
The Fed comments have added to investor unease over the war in Ukraine, coronavirus outbreaks in China and persistent high inflation.
Minutes from the Fed's meeting last month showed policymaker s agreed to begin cutting the Fed's stockpile of Treasurys and mortgage-backed securities by about $95 billion a month, starting in May. That's more than some investors expected and nearly double the pace the last time the Fed shrank its balance sheet.
European shares wobbled after the open, with the CAC 40 in Paris up 0.2% at 6,508.50 and Germany's DAX edging 0.1% lower to 14,141.12. The FTSE 100 in London shed 0.3% to 7,554.73.
On Wall Street, the future for the S&P 500 was nearly unchanged. The future for the Dow Jones Industrial Average was 0.1% lower.
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The S&P 500 fell 1% on Wednesday, while the Dow lost 0.4%. The tech-heavy Nasdaq lost 2.2%.
In Asian trading, Tokyo's Nikkei 225 index lost 1.7% to 26,888.57 while the Hang Seng in Hong Kong slipped 1.2% to 21,808.98. The Shanghai composite index shed 1.4% to 3,236.70. South Korea's Kospi declined 1.4% to 2,695.86 and Australia's S&P/ASX 200 gave up 0.6% to 7,442.80.
Chinese markets declined despite state media reports that Premier Li Keqiang, the country's top economic official, promised support for the economy as it battles its worst coronavirus outbreaks so far.
Li told a meeting of the State Council, or Cabinet, that monetary policy would be used to "effectively support the real economy," Xinhua reported.
The State Council agreed to postpone required payments of pension insurance premiums on a time-limited basis for industries facing "special difficulty," and to channel unemployment insurance funds to help companies keep people on payrolls, it said.
While China is contending with slumping growth, the U.S. central bank is moving to cool inflation by reversing low interest rates and the extraordinary support it began providing for the economy two years ago when the pandemic knocked the economy into a recession.
A faster reduction in the Fed's balance sheet would help push up longer-term rates, but also raise borrowing costs for consumers and businesses.
At its meeting in March, the Fed raised its benchmark short-term rate by a quarter percentage point, the first increase in three years. The minutes showed many Fed officials wanted to hike rates by an even bigger margin last month, and they still saw "one or more" such supersized increases potentially coming at future meetings.
Higher rates tend to reduce the price-to-earnings ratio of stocks, a key valuation barometer. Such a scenario can particularly hurt stocks that are seen as the priciest, which includes big technology companies.
Early Thursday, the yield on the 10-year U.S. Treasury, which is used to set interest rates on mortgages and many other kinds of loans, was at 2.57%. It is at the highest levels it's been in three years.
Traders are now pricing in a nearly 77% probability the Fed will raise its key overnight rate by half a percentage point at its next meeting in May. That's double the usual amount and something the Fed hasn't done since 2000.
Inflation is running at a four-decade high and threatens to crimp economic growth. Higher prices on everything from food to clothing have raised concerns that consumers will eventually pull back on spending. Russia's invasion of Ukraine has has pushed up prices of energy and commodities such as wheat and nickel.
Western governments have been stepping up sanctions against Russia following evidence its soldiers deliberately killed civilians in Ukraine. But European governments have resisted appeals to boycott Russian gas, Putin's biggest export earner, due to the possible impact on their economies.
U.S. benchmark crude oil prices fell 5.6% Wednesday, but are more than 30% higher this year. That has pushed gasoline prices higher, putting more stress on shipping costs, prices for goods and consumers' wallets.
On Thursday, U.S. benchmark crude gained 30 cents to $96.53 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the standard for international pricing, rose 27 cents to $101.34 per barrel.
The dollar fell to 123.77 Japanese yen from 123.81 yen. The euro fell to $1.0882 from $1.0985.