Global Shares Decline After Fed Chair Inflation Comments

TOKYO (AP) -- Global shares were mostly lower Thursday following a retreat on Wall Street after the Federal Reserve chair indicated he believes inflation still isn't under control.

Benchmarks in Europe slid in early trading as the central banks of Switzerland and Norway raised their benchmark interest rates to counter inflation, while the Bank of England was expected to do so.

The British central bank is fighting to quash stubbornly high inflation that has failed to retreat from its peak as quickly as expected. The consensus among analysts was that it will raise its main interest rate by a quarter-percentage point -- hitting a new 15-year high of 4.75%. But some worried it might opt for a bigger half-point increase, heaping pain on people with loans, especially the 1.4 million or so households in the U.K. that will have to refinance their mortgages over the rest of the year.

France's CAC 40 shed 1.2% in early trading to 7,174.46, while Germany's DAX fell 0.7% to 15,907.25. Britain's FTSE 100 slipped 0.8% to 7,495.94. The future for the Dow Jones Industrial Average fell 0.1% while the contract for the S&P 500 was 0.2% lower.

In Asian trading, Japan's benchmark Nikkei 225 fell 0.9% to finish at 33,264.88. Australia's S&P/ASX 200 declined 1.6% to 7,195.50. South Korea's Kospi gained 0.4% to 2,593.70. Markets were closed in Hong Kong and Shanghai for the Dragon Boat Festival, a national holiday.

That provided traders there a break from jitters about possible renewed tensions in the U.S.-China relationship after President Joe Biden referred to Chinese President Xi Jinping as a dictator. That pushed "back against the idea that the U.S.-China relationship could be warming with Secretary of State Antony Blinken's visit," Yeap Jun Rong, market analyst at IG said in a commentary.

During Blinken's Beijing visit earlier this week, both sides agreed to stabilize ruptured ties. But Blinken said China was not ready to resume military-to-military contacts.

Fitch Ratings said in its June Global Economic Outlook that the global growth outlook for next year has deteriorated, given the prospects of higher interest rates around the world.

"Global growth is showing near-term resilience but with core inflation remaining stubbornly high, central banks will have to continue tightening policy in the coming months," it said.

Fed Chair Jerome Powell told lawmakers Wednesday that "the process of getting inflation back down to 2% has a long way to go." He said again that a couple more rate increases may be on the way, though the speed of the hikes is likely to slow after moving at a furious speed since early 2022.

He likened it to slowing from 75 miles per hour on a highway to 50 and then even slower as the destination nears.

High rates have already helped cause three high-profile failures in the U.S. banking system. The banking industry remains under pressure, even after the federal government acted quickly to provide support.

In energy trading Thursday, benchmark U.S. crude fell 47 cents to $72.06 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost 49 cents to $76.63 a barrel.

In currency trading, the U.S. dollar edged up to 141.97 Japanese yen from 141.81 yen. The euro cost $1.0993, little changed from $1.0990.


Yuri Kageyama is on Twitter…