Global stocks fall after Fed says US inflation is too high
Global stock markets and Wall Street futures mostly fell on Thursday after the Federal Reserve said US inflation was too high despite aggressive rate hikes, suggesting support for further increases.
London, Shanghai, Tokyo and Hong Kong fell. Frankfurt opened higher. Oil prices rose slightly.
Notes released Wednesday at the Fed’s July 26-27 board meeting say inflation is “unacceptably high” despite signs of weakening U.S. economic growth. Board members saw “little evidence” that inflationary pressures are easing.
Investors fear aggressive rate hikes imposed by the Fed and central banks in Europe and Asia this year to rein in inflation, which is at multi-decade highs, could derail global economic growth.
The Fed’s ratings raised “prospects for further tightening,” while some investors see possible “excessive tightening holding back growth,” Mizuho Bank’s Venkateswaran Lavanya said in a report.
In early trading, the FTSE 100 in London slipped 0.2% to 7,498.98 while Frankfurt’s DAX gained 0.3% to 13,672.70. The CAC 40 in Paris gained 0.2% to 6,539.60.
On Wall Street, futures on the benchmark S&P 500 and the Dow Jones Industrial Average were down 0.3%.
In Asia, the Shanghai Composite Index lost 0.5% to 3,277.54 and the Nikkei 225 in Tokyo fell 1% to 28,942.14. The Hang Seng in Hong Kong fell 0.8% to 19,763.91.
Seoul’s Kospi fell 0.3% to 2,508.05 and Sydney’s S&P-ASX 200 fell 0.2% to 7,112.80.
India’s Sensex fell 0.3% to 60,064.94. New Zealand and Bangkok fell while Singapore and Jakarta advanced.
On Wall Street, the S&P 500 fell 0.7% on Wednesday, erasing the week’s gains. That left the index down 0.1% since Monday.
The Dow Jones fell 0.5% and the Nasdaq 1.3%.
The Fed notes made it clear that the board planned to continue raising rates, but gave no indication of when or by how much.
The US central bank has raised its benchmark policy rate twice this year by 0.75 percentage points, triple its usual margin. Forecasters say a rise of the same magnitude is possible at its September meeting, although the likelihood has diminished as data shows the economy weakening.
The Commerce Department said July retail sales were flat from the previous month, defying forecasts of a slight increase. Retailers have warned that high inflation will discourage consumers from spending on non-essentials.
Retail chain Target fell 2.7% after reporting a nearly 90% drop in second-quarter profits. Children’s clothing and accessories chain Children’s Place fell 11% after reporting a surprise loss due to supply issues and inflationary pressure.
Technology and communications stocks also fell.
In energy markets, benchmark U.S. crude rose 18 cents to $88.29 a barrel in electronic trading on the New York Mercantile Exchange. It jumped $1.58 to $88.11 on Wednesday. Brent crude, the price basis for international trade, gained 37 cents to $94.02 a barrel in London. It jumped from $1.31 the previous session to $93.65.
The dollar rose to 135.28 yen from 135.05 yen on Wednesday. The euro fell slightly to $1.0163 from $1.0169.