Global Shares Mixed Amid Speculation About Fed Rate Hike

Global Shares Mixed Amid Speculation About Fed Rate Hike
A person wearing a protective mask walks in front of an electronic stock board showing Japan's Nikkei 225 and New York Dow indexes at a securities firm in Tokyo, Japan, on Aug. 23, 2022. (Eugene Hoshiko/AP Photo)
The Associated Press

TOKYO—Global shares were mixed Tuesday amid speculation about another interest rate raise by the U.S. Federal Reserve.

Benchmarks in Asia finished lower in Japan, Australia, South Korea, and China, but European indexes were mixed, rising in France and Germany while falling in Britain. Oil prices rose.

France's CAC 40 added 0.2 percent in early trading to 6,391.76. Germany's DAX rose 0.3 percent to 13,265.61. Britain's FTSE 100 fell 0.4 percent to 7,503.25. U.S. shares were set to drift higher with Dow futures up 0.3 percent at 33,145.00. S&P 500 futures were up 0.3 percent at 4,153.25.

Investors are grappling with uncertainty over when the highest U.S. inflation in decades will ease significantly, how much the U.S. Fed will have to raise interest rates in order to get it under control, and how much the rate hikes will slow the economy.

Investors will be looking for insight into these unknowns later this week, when the Federal Reserve holds its annual meeting in Jackson Hole, Wyoming.

“The downbeat mood in Wall Street is playing out in the Asia session as well, and although another round of rate cuts to the benchmark lending rate in China yesterday may aid to cushion some losses, overall upside could still remain limited amid the shunning of risks,” said Yeap Jun Rong, market strategist at IG in Singapore.

The People’s Bank of China cut a lending rate Monday, a week after it cut interest rates.

Japan's benchmark Nikkei 225 lost 1.2 percent to finish at 28,452.75. Australia's S&P/ASX 200 slid 1.2 percent to 6,961.80. South Korea's Kospi dipped 1.1 percent to 2,435.34. Hong Kong's Hang Seng shed 0.8 percent to 19,503.25, while the Shanghai Composite was little changed, inching down less than 0.1 percent at 3,276.22.

“Investors are being cautious as continuous risk-off flows have hit global markets,” said Anderson Alves at ActivTrades, noting that rising gas prices were a big risk, especially for Europe.

Bond yields gained ground. The yield on the 10-year Treasury, which influences rates on home mortgages and other loans, rose to 3.03 percent from 2.97 percent late Friday.

The broader market's losses come on the heels of a weekslong rally. Investors are trying to figure out where the economy goes from here as stubbornly hot inflation hurts businesses and consumers. Record-high inflation also has investors focusing on central banks and their efforts to fight high prices without further damaging economic growth.

“You’ve had quite a rally and there’s reason to not be sure where we’re going from here,” said Tom Martin, senior portfolio manager with Globalt Investments. “There's still decent potential for a recession.”

Minutes last week from the Federal Reserve's July board meeting affirmed plans for more rate hikes despite signs of weaker economic activity. Traders worry aggressive steps to slow the economy might go too far and bring on a recession.

Fed Chair Jerome Powell is scheduled to give a speech on Friday morning at the central bank's annual meeting. The Fed is holding its meeting following a heavy week of company and economic data that showed inflation is still squeezing the economy, but consumer spending remains resilient.

“I don’t think we're out of the woods yet on inflation,” Martin said. “We still don’t really know how inflation is going to pan out and what the Fed is going to do.”

In energy trading, benchmark U.S. crude rose $1.25 to $91.61 a barrel. Brent crude, the international standard, added $1.01 to $97.49 a barrel.

In currency trading, the U.S. dollar fell to 137.26 Japanese yen from 137.49 yen. The euro was little changed at 99 cents.

By Yuri Kageyama
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