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Wall St poised for gains after flirting with bear market

NEW YORK (AP) – Wall Street pointed toward gains before markets opened yesterday after dipping close to the edge of a bear market to close the week last Friday.

Futures for the Dow Jones Industrials rose one per cent and the S&P 500 climbed 1.1 per cent in premarket trading.

Benchmarks rose in Frankfurt, London and Tokyo and fell in Paris and Hong Kong. Oil prices also gained. Yet it has been a brutal stretch for major markets in the United States (US) and globally.

Last Friday, the S&P 500 dipped more than 20 per cent below its peak set early this year before buying late in the day gave it a tiny gain. It finished 18.7 per cent below its record.

That capped a seventh straight losing week, the longest since 2001, when the dot-com bubble was deflating.

Inflation and rising interest rates, the war in Ukraine, and China’s slowing economy are all punishing stocks and raising fears about a possible US recession.

Traders work on the New York Stock Exchange floor. PHOTO: AP

Investors are looking ahead to the release of minutes from the latest policy setting meeting of the Federal Reserve and updates on consumer prices, due later this week.

Britain’s FTSE 100 rose 1.1 per cent in midday trading, while Germany’s DAX gained 0.8 per cent and the CAC 40 in Paris picked up 0.3 per cent.

In Asian trading, the Nikkei 225 in Tokyo gained one per cent to 27,001.52.

Visiting Japan, President Joe Biden launched a fresh US initiative on economic cooperation and trade. Called the Indo-Pacific Economic Framework, the White House said it will help the US and Asian economies work more closely on issues including supply chains, digital trade, clean energy, worker protections and anticorruption efforts.

Details remained to be negotiated, making it unclear how the framework might help US workers and businesses while also serving the interests of partner countries.

South Korea’s Kospi climbed 0.3 per cent to 2,647.38.

Australia’s S&P/ASX 200 edged 0.1 per cent higher to 7,148.90 after Australia’s centre-left opposition party on Saturday toppled the conservative government that had held power for almost a decade.

Anthony Albanese was sworn in as prime minister after his Labor party clinched its first electoral win since 2007. (See also Page 25)

Labor has promised more financial assistance and a robust social safety net as Australia grapples with the highest inflation since 2001 and soaring housing prices.

But analysts said the policy stance of the newly elected administration was not significantly different from the incumbent government and major changes were not expected.

“Although it is possible that Labor will represent a slightly more fiscally supportive government than their predecessors, we don’t see many implications for financial markets from this election result,” ING Economics economists said in a commentary.

Hong Kong’s Hang Seng index lost 1.2 per cent to 20,470.06 while the Shanghai Composite index was nearly unchanged at 3,146.86.Hong Kong-traded shares in food delivery company Meituan lost 3.1 per cent while e-commerce giant Alibaba Group Holding gave up 3.4 per cent.

Many tech stocks, seen as some of the most vulnerable to rising interest rates, have already fallen much more than 20 per cent this year. That includes a 37.2 per cent tumble for Tesla and a 69.1 per cent nosedive for Netflix.

It’s a sharp turnaround from the powerful run Wall Street enjoyed after emerging from its last bear market in early 2020, at the start of the pandemic.

With inflation at its highest level in four decades, the Fed has switched from keeping interest rates super-low to support markets and the economy and is raising rates and making other moves to tamp down inflation.

The worry is it might go too far or too quickly.

Goldman Sachs economists recently put the probability of a US recession in the next two years at 35 per cent. Inflation has been painfully high for months.

But the market’s worries swung higher after Russia’s invasion of Ukraine sent prices spiralling further at grocery stores and gasoline pumps, because the region is a major source of energy and grains.

In other trading, US benchmark crude oil added USD1.12 to USD111.40 per barrel in electronic trading on the New York Mercantile Exchange.

It gained 39 cents to USD110.28 last Friday.

Brent crude, used as the basis for pricing for international trading, advanced USD1.28 to USD113.83 per barrel.

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