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Europe stocks up, Asia mixed ahead of Fed rate hike decision

BEIJING (AP) – Asian stock markets were mixed while Europe opened higher yesterday ahead of a United States (US) Federal Reserve decision on how sharply to raise interest rates to cool US inflation.

London, Frankfurt and Shanghai advanced. Tokyo and Sydney declined. Oil prices edged lower.

Wall Street futures were higher after the benchmark S&P 500 index lost 0.4 per cent on Tuesday.

Traders expect the Fed rate hike to be three-quarters of a percentage point, or triple the usual margin. They worry aggressive action to cool inflation that is running at a four-decade high might tip the biggest global economy into recession.

A “hawkish surprise” from the Fed could be a “further shock to risk assets”, Anderson Alves of ActivTrades said in a report. “Money markets are already pricing around 90 per cent possibility of such action.”

In early trading, the FTSE 100 in London rose 1.1 per cent to 7,262.53 and Frankfurt’s DAX gained 1.4 per cent to 13,498.03. The CAC 40 in Paris advanced 1.4 per cent to 6,033.15.

People walk past a bank’s electronic board showing the Hong Kong share index in Hong Kong. PHOTO: AP

On Wall Street, the S&P 500 future gained 0.8 per cent and that for the Dow Jones Industrial Average was up 0.7 per cent.

On Tuesday, the S&P 500 lost 0.4 per cent. It closed on Monday at 21.8 per cent below its January 3 peak. That puts it in a bear market, or a drop of 20 per cent from the last market top.

The Dow fell 0.5 per cent and the Nasdaq composite rose 0.2 per cent.

The Shanghai Composite Index gained 0.5 per cent yesterday to 3,305.41 after government data showed Chinese factory activity rebounded in May as anti-virus controls that shut down businesses in Shanghai and other industrial centres eased.

Hong Kong’s Hang Seng gained 1.1 per cent to 21,308.21 while the Nikkei 225 in Tokyo lost 1.1 per cent to 26,326.16.

The Kospi in Seoul shed 1.8 per cent to 2,447.538 after South Korea’s unemployment rate in May ticked up 0.1 percentage point to 2.8 per cent.

Sydney’s S&P-ASX 200 sank 1.3 per cent to 6,601.00.

India’s Sensex gained less than 0.1 per cent at 52,728.02. New Zealand, Jakarta and Bangkok declined while Singapore advanced.

Expectations of an unusually big Fed rate hike increased after government data last Friday showed consumer inflation accelerated in May instead of easing as hoped.

The Fed is scrambling to get prices under control after being criticised earlier for reacting too slowly to inflation pressures.

Britain’s central bank also has raised rates. The European Central Bank said it will do so next month.

Japan’s central bank has kept rates near record lows. That has caused the yen to fall to two-decade lows below 135 to the dollar as traders shift capital in search of higher returns.

Markets also have been jolted by Russia’s attack on Ukraine, which has pushed oil prices to history-making highs above USD120 per barrel, and by virus outbreaks in China that led to the closure of factories and disrupted supply chains.

In energy markets, benchmark US crude lost 50 cents to USD118.43 per barrel in electronic trading on the New York Mercantile Exchange. The contract lost USD2 on Tuesday to USD118.93. Brent crude, the price basis for international oil trading, shed 41 cents to USD120.76 per barrel in London. It fell USD1.10 the previous session to USD121.17.

The dollar declined to JPY134.61 from Tuesday’s JPY135.30. The euro gained to USD1.0498 from USD1.0411.

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