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World stocks retreat as inflation augurs Fed rate hikes

BANGKOK (AP) – Shares were mostly lower in Asia yesterday after the latest report of surging prices in the United States (US) appeared to keep the Federal Reserve on track to raise interest rates in coming months.

London, Paris, Tokyo and Shanghai were lower while Sydney and Hong Kong advanced.

Surging coronavirus cases have been raising uncertainty about the pace of recovery from the pandemic.

Britain and Germany have endured severe waves of the highly contagious Omicron variant of coronavirus. France is at the epicentre of Europe’s current fight against COVID-19, with new infections topping 360,000 a day in recent days.

Germany’s DAX fell 0.2 per cent to 15,973.58 while the CAC 40 in Paris sank 0.6 per cent to 7,196.23. In Britain, the FTSE 100 lost 0.3 per cent to 7,533.13. On Wall Street, the futures for the S&P 500 and for the Dow industrials were down less than 0.1 per cent.

In Asia, the Omicron variant has swept across Australia and is gaining ground in other countries despite high vaccination rates, mask requirements and strict border policies. Japan reported more than 13,000 new infections on Wednesday, the highest level in four months. China, whose zero-COVID policies are being challenged by outbreaks just weeks ahead of the Beijing Winter Games, is testing and in some cases locking down entire cities.

Tokyo’s Nikkei 225 index dropped one per cent to 28,489.13, while the Shanghai Composite shed 1.2 per cent to 3,555.26. In Seoul, the Kospi lost 0.4 per cent to 2,962.09.

A pedestrian passes the New York Stock Exchange. PHOTO: AP

The Hang Seng in Hong Kong edged 0.1 per cent higher, to 24,429.77 and the S&P/ASX 200 in Australia added 0.5 per cent to 7,474.40. India’s Sensex edged 0.1 per cent lower.

Taiwan’s benchmark rose 0.3 per cent after TSMC, the world’s largest contract manufacturer of computer chips, reported a record quarterly profit of just over USD6 billion.

The yield on the 10-year Treasury was steady at 1.74 per cent.

Apart from the direct impact from big coronavirus outbreaks on normal business activity, spill over effects on manufacturing and shipping could further hinder a rebound from the past two years of disruptions.

“So far, the market’s reaction to the omicron wave has been moderate, but it is worth paying attention to worries about further impacts to global supply chains which could trigger risk-off trade,” Anderson Alves of ActivTtrades said in a report.

On Wednesday, the S&P 500 rose 0.3 per cent; the Dow Jones Industrial Average eked out a 0.1-per-cent gain and the Nasdaq composite rose 0.2 per cent.

The Russell 2000 index fell 0.8 per cent.

Investors were focused on a report from the Labor Department, which showed consumer prices jumped seven per cent last month. That’s the fastest year-over-year pace in the consumer price index in nearly four decades.

The sharp increase, which was in line with economists’ forecasts, came a day after Fed Chair Jerome Powell told Congress that the central bank stands ready to raise rates to fight inflation.

Wall Street has been closely watching rising inflation to gauge the impact on businesses and consumers, as well as on the Fed’s plan to trim its support for the economy and markets.

Businesses in many industries have been passing higher costs off to consumers, but have been warning that they will still feel a financial impact because of higher prices and supply chain problems.

Wall Street got another update on rising inflation yesterday, when the Labor Department releases December results from an index based on US wholesale prices.

It shows how inflation is affecting costs for businesses.

Investors also are closely watching the latest round of earnings to see how companies are dealing with inflation.

Delta Air Lines reports its results yesterday. Citigroup, JPMorgan Chase and Wells Fargo report results on Friday.

In other trading yesterday, US benchmark crude oil lost 19 cents to USD82.45 per barrel in electronic trading on the New York Mercantile Exchange.

It gained USD1.42 to USD82.64 per barrel on Wednesday.

Brent crude, the basis for pricing international oils, lost 15 cents to USD84.52 per barrel.

The US dollar fell to JPY114.58 from JPY114.64. The euro rose to USD1.1469 from USD1.1444.