Beijing: Global stock markets fell on Thursday ahead of a US inflation update that will likely influence Federal Reserve plans for more interest rate hikes as investors waited to see who will control Congress after this week’s elections.
London, Shanghai, Frankfurt and Tokyo declined. US futures were higher. The euro fell back below USD 1.
Wall Street’s benchmark S&P 500 index tumbled on Wednesday as votes were counted to decide whether Republicans take control of Congress, possibly leading to changes that can unsettle markets. Investors were rattled by the crypto industry’s latest crisis of confidence and weaker profit reports from The Walt Disney Co. and some other companies.
Forecasters expect US government data on Thursday to show inflation eased in September but stayed near a four-decade high. That might reinforce arguments that rates have to stay elevated for an extended period to slow economic activity and extinguish inflation.
An upside surprise today would present a challenge for officials who expect to slow the pace of rate hikes, Rubeela Farooqi of High-Frequency Economics said in a report.
In early trading, the FTSE 100 in London was 0.1 per cent lower at 7,285.86. The DAX in Frankfurt lost 0.1 per cent to 13,647.47 and the CAC 40 in Paris shed 0.2 per cent to 6,417.98.
On Wall Street, futures for the S&P 500 and the Dow Jones Industrial Average were up 0.3 per cent.
On Wednesday, the S&P 500 lost 2.1 per cent, erasing gains from a three-day rally leading up to Election Day.
Disney sank 13.2 per cent for the largest loss in the S&P 500 after reporting quarterly results that fell short of analysts’ expectations.
The Dow fell 2 per cent and the Nasdaq composite, dominated by tech companies, tumbled 2.5 per cent.
Facebook parent Meta Platforms rose 5.2 per cent after saying it will cut costs by laying off 11,000 employees, or about 13 per cent of its workforce. It is down nearly 70 per cent for the year.
In Asia, Hong Kong’s Hang Seng index fell 1.7 per cent to 16,081.04 and the Nikkei 225 in Tokyo sank 1 per cent to 27,446.10. The Shanghai Composite Index lost 0.4 per cent to 3,036.13.
The Kospi in Seoul declined 0.9 per cent to 2,407.70 and Sydney’s S&P-ASX 200 was off 0.5 per cent at 6,964.00.
India’s Sensex shed 1 per cent to 60,447.97. New Zealand, Bangkok and Jakarta declined while Singapore and Malaysia gained.
The Philippines’ market benchmark lost 0.5 per cent after the government reported the economy grew by 7.6 per cent in the three months ending in September.
Investors worry rate hikes this year by the Fed and central banks in Europe and Asia to cool inflation might tip the global economy into recession. Traders hope indicators that show US housing sales and other activity weakening might prompt the Fed to back off plans for more rate hikes.
In the United States, Republicans were within nine seats of the 218 needed to control the House of Representatives as votes still were being counted in some states. Control of the Senate depended on races in Nevada and Arizona that hadn’t been decided.
The outcome will determine how the next two years of President Joe Biden’s term play out. Republicans are likely to launch a spate of investigations into Biden, his family and his administration if they take power. A GOP takeover of the Senate would hobble the president’s ability to appoint judges.
Still, the election impact on markets is pretty irrelevant beyond the very near term, said David Chao of Invesco in a report. Investors should be worried about inflation, since that will help to dictate the Fed’s future path.
Forecasters expect Thursday’s data to show inflation decelerated to 7.9 per cent in September from the previous month’s 8.3 per cent. However, prices were expected to rise 0.6 per cent compared with August, accelerating from July’s 0.1 per cent increase.
Core inflation, which strips out volatile food and energy prices to show a clearer trend, is expected to accelerate to 6.5 per cent from August’s 6.3 per cent. That suggests costs of rent, medical services, autos and other goods and services still are rising in response to strong demand.
Traders expect the Fed to raise rates again next month but by a smaller margin of one-half percentage point after a series of 0.75 percentage-point increases. The Fed’s key lending rate is a range of 3.75 per cent to 4 per cent, up from close to zero in March. A growing number of investors expect it to exceed 5 per cent next year.
Also on Wednesday, cryptocurrencies fell amid worries about the industry’s financial strength after a big player, Binance, called off a deal to buy troubled rival FTX. That at least temporarily ended hopes for a bailout after FTX users scrambled to pull out their money.
Bitcoin fell 14 per cent from a day earlier to USD 15,900. That is down 77 per cent from last year’s high of USD 69,000.
The yield on the 10-year Treasury, which helps dictate rates for mortgages and other loans, fell to 4.08 per cent from 4.13 per cent late Tuesday. The two-year yield, which tends to more closely track expectations for Fed action, dropped to 4.60 per cent from 4.66 per cent.
In energy markets, benchmark US crude shed 49 cents to USD 85.34 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oil trading, lost 42 cents to USD 92.23 per barrel in London.
The dollar gained to 146.31 yen from Wednesday’s 145.56 yen. The euro declined to 99.83 cents from USD 1.0073. (AP)
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