Global stocks lower after inflation fuels rate fears
Some traders hoped the Fed might ease off rate increases as activity cooled and possibly start to cut rates by the end of this year
Charts indicate no trend change signs
Beijing: Global stock markets declined Thursday after signs of enduring upward pressure on US and European prices raised expectations that interest rates will stay higher for longer. London, Shanghai, Frankfurt and Tokyo retreated. Oil prices fell. Wall Street futures were lower after a survey showed prices paid by US manufacturers rose in February for the first time in five months despite rate increases to cool economic activity and surging inflation. That prompted traders to raise forecasts for how high the Federal Reserve might hike rates and for when cuts might start. “Inflation expectations are climbing again,” said Brian Levitt of Invesco in a report. “The Fed pause may not be coming now until the middle of the year, at the earliest.” Elsewhere, data Wednesday from Germany, Europe's biggest economy, showed inflation held steady in February after rate hikes by the European Central Bank. There are “very few to no signs of any disinflationary process outside of energy and commodity prices,” Carsten Brzeski of ING said in a report.
In early trading, the FTSE 100 in London gave up 0.3 per cent to 7,888.49. The DAX in Frankfurt declined 0.9 per cent to 15,173.04 and the CAC 40 in Paris lost 0.8 per cent to 7,176.96. On Wall Street, the future for the benchmark S&P 500 index was 0.7 per cent lower. That for the Dow Jones Industrial Average was off 0.1 per cent. On Wednesday, the S&P 500 lost 0.5 per cent while the Dow edged up less than 0.1 per cent. The Nasdaq fell 0.7 per cent. An industry group, the Institute for Supply Management, reported Wednesday a monthly index of prices paid by manufacturers rose to 51.3 from January's 44.5 on a 100-point scale on which numbers above 50 show an increase. In Asia, the Shanghai Composite Index lost less than 0.1 per cent to 3,310.65 and the Nikkei 225 in Tokyo sank less than 0.1 per cent to 27,498.87. The Hang Seng in Hong Kong gave up 0.9 per cent to 20,429.46. The Kospi in Seoul rose 0.6 per cent to 2,427.85 and Sydney's S&P-ASX 200 added less than 0.1 per cent to 7,255.40. India's Sensex lost 0.8 per cent to 58,908.28. New Zealand and Jakarta gained while Singapore and Bangkok retreated.
Some traders hoped the Fed might ease off rate increases as activity cooled and possibly start to cut rates by the end of this year. But those hopes have been dampened by signs inflation is sticking at high levels and warnings by Fed Chair Jerome Powell and other officials that rates will stay elevated for an extended period until price pressures are extinguished. The Fed has raised its benchmark lending rate to 4.5 per cent to 4.75 per cent from close to zero at the start of 2022 in an effort to cool inflation to 2 per cent.
