BEIJING (AP) – Global stock markets and Wall Street futures sank yesterday after a Federal Reserve official’s comments fuelled expectations of more aggressive United States (US) rate hikes and the White House announced more sanctions on Russia.
London and Frankfurt opened lower. Tokyo and Hong Kong fell, while Shanghai was little changed. Oil prices rose more than USD1 per barrel.
Wall Street’s S&P 500 index tumbled 1.3 per cent on Tuesday after Fed Governor Lael Brainard said reining in inflation that is at a four-decade high is of “paramount importance”.
Brainard said the Fed is set to keep raising rates after its March hike, its first in four years, and might decide at its May meeting to reduce bond holdings “at a rapid pace”.
The White House said Western governments will ban new investment in Russia following evidence its soldiers deliberately killed civilians in Ukraine. The US Treasury said President Vladimir Putin’s government will be blocked from paying debts with dollars from American financial institutions, potentially increasing the risk of a default.
European governments have resisted appeals to boycott Russian gas, Putin’s biggest export earner, due to the possible impact on their economies.
“It’s hard to be particularly optimistic” about the war, “but we live in hope,” said Craig Orlam of Oanda in a report. “And it seems investors do too” despite inflation, rate hikes and high commodity prices.
In early trading, the FTSE 100 in London lost 0.4 per cent to 7,580.69 and Frankfurt’s DAX tumbled 1.3 per cent to 14,239.24. The CAC 40 in Paris sank 1.2 per cent to 6,567.30.
On Wall Street, the future for the S&P 500 was off 0.5 per cent and that for the Dow Jones Industrial Average retreated 0.4 per cent. On Tuesday, the S&P 500 recorded its first loss in three days and the Dow fell 0.8 per cent. The Nasdaq composite slid 2.3 per cent.
In Asian trading, the Hang Seng in Hong Kong fell 1.9 per cent to 22,080.52 and the Nikkei 225 in Tokyo sank 1.6 per cent to 27,350.30. The Shanghai Composite Index ended up less than 0.1 per cent at 3,283.43 after spending most of the day in negative territory.
The Kospi in Seoul gave up 0.9 per cent to 2,735.30 and Sydney’s S&P-ASX 200 lost 0.5 per cent to 7,490.10.
India’s Sensex shed 0.9 per cent to 59,629.07. New Zealand and Southeast Asian markets also retreated.
Traders are pricing in a nearly 78 per cent probability the Fed will raise its key rate by half a percentage point at its next meeting in May. That would be double the usual margin of change and a step the Fed hasn’t taken since 2000.
Higher interest rates tend to hurt stocks that are seen as the priciest, which puts the focus on big technology and other high-growth stocks. On Wall Street, Apple and Tesla were some of the biggest weights on the market on Tuesday.
Wall Street is watching for clues as to how sharply interest rates will rise. Yesterday, the Fed is due to release minutes from its March interest rate meeting.
Twitter rose another two per cent after disclosing an arrangement with Tesla chief Elon Musk that will give him a board seat but also limit how much of the company he can buy while he’s a director. The company disclosed a day earlier that the billionaire Twitter critic had become its largest shareholder.
Benchmark US oil rose USD1.19 to USD103.15 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell USD1.32 on Tuesday to USD101.96. Brent crude, the price basis for international oil trading, added USD1.10 to USD107.74 per barrel in London. It declined 89 cents the previous session to USD106.64.
