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Global stocks, Wall St futures skid on fears over rate hike

BEIJING (AP) – World stocks followed Wall Street lower yesterday as fears spread that United States (US) interest rate hikes to fight inflation might stall economic growth.

London and Frankfurt opened lower. Shanghai, Hong Kong and Sydney declined. Tokyo gained as trading resumed after a holiday.

Wall Street futures fell after the benchmark S&P 500 index plunged 3.6 per cent on Thursday as optimism that drove the previous day’s rally evaporated.

Investors worry about whether the Federal Reserve, which raised its key interest rate by a half percentage point on Wednesday, can cool inflation without tipping the US economy into recession. Traders were briefly encouraged by chairman Jerome Powell’s comment that the Fed wasn’t considering even bigger increases.

“Clearly, investors had second thoughts about the so-called ‘dovish hike’ from the Fed,” Rob Carnell of ING said in a report. The likelihood is “rate hikes coming thick and fast, but little if any prospect of a turn in inflation any time soon”.

A man cycles past an electronic stock board of a securities firm in Tokyo. PHOTO: AP

In early trading, the FTSE 100 in London lost 0.6 per cent to 7,461.01 and Frankfurt’s DAX sank 0.9 per cent to 13,772.99. The CAC 40 in Paris shed 1.1 per cent to 6,296.18.

On Wall Street, futures for the S&P 500 and Dow Jones Industrial Average were up 0.3 per cent.

Also yesterday, the US government was due to report employment data.

On Thursday, the Dow lost 3.1 per cent and the Nasdaq slumped five per cent. In Asia, the Shanghai Composite Index fell 2.2 per cent to 3,001.56 and Hong Kong’s Hang Seng plunged 3.8 per cent to 20,001.96. The Nikkei 225 in Tokyo added 0.7 per cent to 27,003.56.

The Kospi in Seoul tumbled 1.2 per cent to 2,644.51 and Sydney’s S&P-ASX 200 lurched down 2.2 per cent to 7,205.60.

India’s Sensex lost 1.5 per cent to 54,880.33. New Zealand and Southeast Asia markets also declined.

Russia’s war on Ukraine, high oil prices and global supply chain disruptions are adding to investor unease.

Also on Thursday, the Bank of England raised its benchmark rate to the highest level in 13 years, its fourth hike since December to cool British inflation that is running at 30-year highs.

Oil prices stayed above USD100 per barrel despite a decision on Thursday by major oil producers to increase exports. European governments are considering an embargo on Russian oil and are trying to line up other supplies in a tight market.

Benchmark US crude gained 96 cents to USD109.22 in electronic trading on the New York Mercantile Exchange. The contract rose 45 cents to USD108.26 on Thursday. Brent crude, the price basis for international oil trading, advanced 83 cents to USD111.73 per barrel in London. It rose 76 cents the previous session to USD110.90 a barrel.

The dollar rose to JPY130.67 from Thursday’s JPY130.40. The euro gained to USD1.0574 from USD1.0519.