World Shares Lower as Strong Data Hit Hopes for Dovish Fed
BANGKOK (AP) -- World stocks were mostly lower on Tuesday after Wall Street pulled back as surprisingly strong economic reports highlighted the challenges the Federal Reserve faces in battling inflation.
Germany's DAX lost 0.2% to 14,421.84 and the CAC 40 in Paris also was down 0.2%, at 6,682.03. Britain's FTSE 100 lost 0.3% to 6,679.98. The futures for the S&P 500 and the Dow industrials were 0.1% lower.
Highlighting worries over recession, Fitch Ratings revised its forecasts for world economic growth downward on Tuesday to reflect the Fed's and other central banks' interest rate hikes.
The ratings agency's Global Economic Outlook report estimated global growth at 1.4% in 2023, revised down from 1.7% in its September forecast. It put U.S. growth in 2023 at 0.2%, down from 0.5%, as the pace of monetary policy tightening increases.
China's growth forecast was cut to a 4.1% annual pace from 4.5%.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
Markets have been lifted by expectations China will press ahead with easing its stringent pandemic restrictions, relieving pressures on trade, manufacturing and consumer spending.
In Asian trading, Hong Kong's Hang Seng fell 0.4% to 19,441.18 and the Kospi in South Korea fell 1.1% to 2,393.16. The Shanghai Composite index was flat at 3,212.53.
Tokyo's Nikkei 225 index closed 0.2% higher at 27,885.87.
Shares fell in Bangkok and Taiwan.
Investors have been hoping the Fed might slow the pace of its interest rate hikes aimed at curbing stubbornly high inflation.
The services sector, which makes up the biggest part of the U.S. economy, showed surprising growth in November, the Institute for Supply Management reported Monday. Business orders at U.S. factories and orders for durable goods in October also rose more than expected.
That news is positive for the broader economy, but it complicates the Fed's fight against inflation because it likely means the central bank will have to keep raising interest rates to bring down price pressures.
"Inflation will likely prove to be stickier and with the service part of the economy refusing to weaken. The risks that the Fed might need to do more remain elevated," Edward Moya of Oanda said in a statement.
The Fed is meeting next week and is expected to raise interest rates by a half-percentage point, which would mark an easing of sorts from a steady stream of three-quarters of a percentage point rate increases. It has raised its benchmark rate six times since March, driving it to a range of 3.75% to 4%, the highest in 15 years. Wall Street expects the benchmark rate to reach a peak range of 5% to 5.25% by the middle of 2023.
The aim is to cool growth without slamming on the brakes and causing a recession that would cascade through the global economy, slowing trade and consumer spending .
The S&P 500 fell 1.8% Monday while the Dow Jones Industrial Average lost 1.4%. The tech-heavy Nasdaq skidded 1.9% and the Russell 2000 index tumbled 2.8%.
A weekly update on U.S. unemployment claims is due Thursday and November's monthly report on producer prices will be released on Friday.
In other trading Tuesday, U.S. benchmark crude oil lost 84 cents to $76.09 per barrel in electronic trading on the New York Mercantile Exchange. It lost $3.05 to $76.93 per barrel on Monday.
Brent crude, the pricing basis for international trading, shed 89 cents to $81.79 per barrel.
The U.S. dollar fell to 136.54 Japanese yen from 136.71 yen late Monday. The euro climbed to $1.0496 from $1.0491.