World shares mixed after latest Wall St retreat
BANGKOK (AP) – Stocks rose in Europe on Monday after retreating in Asia, where they trailed Wall Street’s recent decline.
US stocks suffered their worst setback since early December last week. Reports on inflation, jobs and retail spending came out hotter than expected, prompting analysts to upgrade forecasts of how much the Federal Reserve will need to hike interest rates to slow the US economy and cool inflation.
Higher interest rates depress business activity and investment prices. So far, they don’t appear to be curbing growth as much as expected. The S&P 500 fell 1.1% on Friday to cap its third consecutive loss. The Dow Jones Industrial Average fell 1% and the Nasdaq Composite lost 1.7%.
“It is becoming increasingly clear that inflation and associated inflation expectations and wage pressures will not decline in a predictable linear fashion,” Mizuho Bank said in a comment. Geopolitical tensions also weighed on sentiment after the US and other Western countries imposed new sanctions on Russia over its war in Ukraine.
In Monday trading, Germany’s DAX rose 1.2% to 15,401.15, while the CAC 40 in Paris rose 1.3% to 7,281.00. Britain’s FTSE 100 rose 0.9% to 7,945.59. Futures for the Dow Jones Industrial Average rose 0.3% and those for the S&P 500 rose 0.4%.
In Asia, Tokyo’s Nikkei 225 index fell 0.1% to 27,423.96 and Seoul’s Kospi slipped 0.9% to 2,402.64.
In Hong Kong, the Hang Seng fell 0.3% to 19,943.51, while the Shanghai Composite Index fell 0.3% to 3,258.03. Australia’s S&P/ASX 200 lost 1.1% to 7,224.80.
Bangkok was down 0.2% while the Mumbai Sensex fell 0.6%.
The Fed’s preferred measure of inflation, reported Friday, said prices in January were 4.7% higher than a year earlier, after ignoring food and energy costs as they can fluctuate faster than others. That was an acceleration from December’s inflation rate and was higher than economists’ expectations for 4.3%.
It echoed other reports earlier in the month that showed January inflation was higher than expected at both consumer and wholesale levels.
Other data on Friday showed that consumer spending, the bulk of the economy, returned to growth in January, up 1.8% from December. A separate measure of consumer sentiment came in slightly stronger than previously thought, while new home sales rose slightly more than expected.
That strength, coupled with the remarkably resilient labor market, raises the likelihood that the economy could avoid a recession in the near term. But they also make it more likely that the Fed will keep rates high for longer.
Technology and growth stocks have taken the brunt of the selling pressure. Investments that are viewed as the most expensive, riskiest, or those that keep their investors waiting the longest for big growth are among the most vulnerable to higher interest rates.
Traders are increasingly betting on the Fed raising interest rates to at least 5.25% and keeping it at that high level through the end of the year. It is currently in a range of 4.50% to 4.75% and was practically zero a year ago.
Expectations of a firmer Fed have seen yields soar in the Treasury market this month and continued to rise on Friday.
The yield on the 10-year government bond rose to 3.96% from 3.89% late Thursday. It helps set interest rates on mortgages and other major loans. The two-year yield, which is moving closer to the Fed’s expectations, rose to 4.79% from 4.71% and is near its highest level since 2007.
On the other day of trading, US benchmark crude rose 38 cents to $76.70 a barrel in electronic trading on the New York Mercantile Exchange. On Friday it was up 93 cents to $76.32 a barrel. Brent crude, the price basis for international trade, fell 34 cents to $83.16 a barrel.
The dollar fell to 136.35 Japanese yen from 136.45 yen. The euro rose to $1.0558 from $1.0549.
Elaine Kurtenbach, The Associated Press