Global Stocks Mixed After US Inflation Feeds Rate Hike Fears

BEIJING (AP) -- Asian stocks fell and European markets opened mixed Wednesday after U.S. inflation edged down less than expected, fueling concern the Federal Reserve might think more interest rate hikes are needed.

London, Tokyo and Shanghai declined. Frankfurt advanced. Oil prices fell by more than $1 per barrel.

Wall Street futures were lower after official data Tuesday showed inflation slowed to 6.4% in January from the previous month's 6.5%. That was hotter than the consensus expectation of 6.2%.

Core inflation, which strips out more volatile food and energy prices to give a clearer view of the trend, rose to 0.4% over a month earlier from December's 0.3%.

"Disinflation trends are in danger, which could prompt the Fed to both deliver more rate hikes and for them to stay higher for longer," said Edward Moya of Oanda in a report.

In early trading, the FTSE 100 in London declined 0.1% to 7,946.73 while the DAX in Frankfurt gained 0.4% to 15,441.24. The CAC 40 in Paris rose 0.7% to 7,260.59.

On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones Industrial Average were down 0.3%.

On Tuesday, the S&P 500 lost less than 0.1% and the Dow fell 0.5%. The Nasdaq composite gained 0.6%.

In Asia, the Shanghai Composite Index lost 0.4% to 3,280.49 and the Nikkei 225 in Tokyo gave up 0.4% to 27,501.86. The Hang Seng in Hong Kong tumbled 1.4% to 20,812.17.

The Kospi in Seoul retreated 1.5% to 2,427.90 and Sydney's S&P-ASX 200 sank 1.1% to 7,352.20.

India's Sensex gained less than 0.1% at 61,055.90. New Zealand advanced while Southeast Asian markets declined.

Stock prices have swung over the past year as traders try to figure out how far the Fed and other central banks will go to extinguish surging inflation. Some worry they might be willing to tip the global economy into a recession.

Traders expect two more U.S. rate hikes of 0.25 percentage points to slow business activity and hiring. Some expect cuts to start as soon the end of this year despite comments by Chair Jerome Powell and other Fed officials that rates might have to stay elevated for an extended period to get inflation to their 2% target.

If inflation stays above 5.5%, that "puts us on track for another four to six Fed rate hikes," Clifford Bennett of ACY Securities said in a report.

"Further retrenchment of the consumer and business investment is a certainty," Bennett said.

The Fed's benchmark lending rate stands at 4.5% to 4.75%, up from close to zero a year ago.

Investors have been raising forecasts for how high it might rise by mid-year. They are betting on a 19.2% probability that its key rate will top 5.5% in July. That is up from a 0.2% probability a month ago, according to CME Group.

The market's expectations for the Fed have been driving yields higher in the bond market.

The two-year Treasury has shot to its highest level since November, egged on last week by a stronger-than-expected report on the U.S. jobs market.

The two-year yield rose to 4.61% from 4.52% late Monday. The 10-year yield, which helps set rates for mortgages and other loans, rose to 3.75% from 3.70%.

In energy markets, benchmark U.S. crude lost $1.30 to $77.76 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.08 on Tuesday to $79.06. Brent crude, the price basis for international oil trading, shed $1.26 to $84.32 per barrel in London. It lost $1.03 the previous session to $85.58.

The dollar gained to 133.43 yen from Tuesday's 133.06 yen. The euro declined to $1.0726 from $1.0739.