World markets mixed over future Fed action

BANGKOK (AP) — World markets were mixed yesterday after a sell-off Friday on Wall Street gave the S&P 500 its worst weekly loss since February.

Japan’s benchmark fell 3.3 per cent but shares rose in London and Frankfurt. United States (US) futures were higher.

Investors are still thinking over the Federal Reserve’s signal that it may raise current ultra-low interest rates sooner than expected and slow its market-supporting bond purchases.

Part of the Fed’s mission is to keep prices under control. The fear is that burgeoning inflation may prompt central banks to dial back the lavish support that has lifted markets to new highs after they plunged at the onset of the coronavirus pandemic last year.

Until its latest policy meeting, last week, the Fed had indicated it viewed recent price hikes as transient and would let the recovering economy run hot.

Now it’s forecasting raising interest rates twice in 2023.

Asian markets opened mostly lower early yesterday but the losses were contained.

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

In Europe, Germany’s DAX gained 0.3 per cent to 15,493.53 and the CAC 40 in Paris edged 0.1 per cent higher, to 6,573.41. In London, the FTSE 100 inched up less than 0.1 per cent, to 7,021.31.

The future for the S&P 500 gained 0.4 per cent while that for the Dow industrials climbed
0.5 per cent.

In Asian trading, the Nikkei 225 gave up 953 points to 28,010.93 and the Kospi in Seoul lost 0.8 per cent to 3,240.79. Hong Kong’s Hang Seng index lost 1.1 per cent to 28,489.00. Australia’s S&P/ASX 200 declined 1.8 per cent to 7,235.30.

The Shanghai Composite index edged 0.1 per cent higher, to 3,529.18. India’s Sensex gained 0.4 per cent and Thailand’s benchmark fell 0.8 per cent.

On Friday, the S&P 500 fell 1.3 per cent to 4,166.45 in a broad retreat, while the Dow Jones Industrial Average lost 1.6 per cent, to 33,290.08. The Nasdaq composite fell 0.9 per cent to 14,030.38.

Markets were spooked after St Louis Federal Reserve President James Bullard told CNBC he expects the first rate increase may come as soon as next year.

The Fed also has begun talks about slowing its USD120 billion of monthly bond purchases, which are helping to keep mortgages and other longer-term borrowing cheap. But the Fed’s chair has said such a tapering is still likely a ways away. Any pullback in Fed support would be a big change for markets, which have been feasting on ultra-low rates for more than a year.

The major US stock indexes remain relatively close to their record highs as the economy powers its way out of the recession caused by the pandemic. The S&P 500 is only about two per cent below its all-time high set yesterday, and the Dow is within five per cent of its record set last month.

The 10-year Treasury yield was steady at 1.43 per cent. In other trading, US benchmark crude oil rose 40 cents to USD72.04 per barrel in electronic trading on the New York Mercantile Exchange.

It gained 60 cents to USD71.64 on Friday. Brent crude, the international standard, picked up 38 cents to USD73.89 per barrel.

The US dollar was at JPY110.10 Japanese down from JPY110.27 last Friday. The euro rose to USD1.1898 from USD1.1861.