BANGKOK (AP) – World stocks were mostly lower yesterday after Wall Street pulled back as surprisingly strong economic reports highlighted the challenges the Federal Reserve faces in battling inflation.
Germany’s DAX lost 0.2 per cent to 14,421.84 and the CAC 40 in Paris also was down 0.2 per cent, at 6,682.03. Britain’s FTSE 100 lost 0.3 per cent to 6,679.98. The futures for the S&P 500 and the Dow industrials were 0.1 per cent lower.
Highlighting worries over recession, Fitch Ratings revised its forecasts for world economic growth downward yesterday to reflect the Fed’s and other central banks’ interest rate hikes.
The ratings agency’s Global Economic Outlook report estimated global growth at 1.4 per cent in 2023, revised down from 1.7 per cent in its September forecast. It put United States (US) growth in 2023 at 0.2 per cent, down from 0.5 per cent, as the pace of monetary policy tightening increases.
China’s growth forecast was cut to a 4.1 per cent annual pace from 4.5 per cent.
Markets have been lifted by expectations China will press ahead with easing its pandemic restrictions, relieving pressures on trade, manufacturing and consumer spending.
In Asian trading, Hong Kong’s Hang Seng fell 0.4 per cent to 19,441.18 and the Kospi in South Korea fell 1.1 per cent to 2,393.16. The Shanghai Composite index was flat at 3,212.53.
Tokyo’s Nikkei 225 index closed 0.2 per cent higher at 27,885.87.
Shares fell in Bangkok.
Investors have been hoping the Fed might slow the pace of its interest rate hikes aimed at curbing stubbornly high inflation.
The services sector, which makes up the biggest part of the US economy, showed surprising growth in November, the Institute for Supply Management reported on Monday. Business orders at US factories and orders for durable goods in October also rose more than expected.
That news is positive for the broader economy, but it complicates the Fed’s fight against inflation because it likely means the central bank will have to keep raising interest rates to bring down price pressures.
“Inflation will likely prove to be stickier and with the service part of the economy refusing to weaken. The risks that the Fed might need to do more remain elevated,” Edward Moya of Oanda said in a statement.
The Fed is meeting next week and is expected to raise interest rates by a half-percentage point, which would mark an easing of sorts from a steady stream of three-quarters of a percentage point rate increases. It has raised its benchmark rate six times since March, driving it to a range of 3.75 per cent to four per cent, the highest in 15 years. Wall Street expects the benchmark rate to reach a peak range of five per cent to 5.25 per cent by the middle of 2023.
The aim is to cool growth without slamming on the brakes and causing a recession that would cascade through the global economy, slowing trade and consumer spending.
The S&P 500 fell 1.8 per cent on Monday while the Dow Jones Industrial Average lost 1.4 per cent. The tech-heavy Nasdaq skidded 1.9 per cent and the Russell 2000 index tumbled 2.8 per cent.
A weekly update on US unemployment claims is due tomorrow and November’s monthly report on producer prices will be released on Friday.
In other trading yesterday, US benchmark crude oil lost 84 cents to USD76.09 per barrel in electronic trading on the New York Mercantile Exchange. It lost USD3.05 to USD76.93 per barrel on Monday.
Brent crude, the pricing basis for international trading, shed 89 cents to USD81.79 per barrel.
The US dollar fell to JPY136.54 from JPY136.71 on Monday. The euro climbed to USD1.0496 from USD1.0491.