World shares fell Thursday following the release of U.S. inflation data that was higher than expected.
U.S. futures and oil prices also fell. A pledge by Chinese leaders of more support for the slowing economy appeared to have little impact.
A report from the U.S. Labor Department showed inflation slowed a touch in April, down to 8.3% from 8.5% in March. The data suggest the consumer price index, or CPI, may be peaking and set to ease further, but the decline was smaller than hoped for and it reinforced expectations that the Federal Reserve will continue to raise interest rates to counter rising prices.
“The consensus is that inflation has peaked, at least in the US. A floor for global equity markets depends on how quickly US CPI inflation falls,” Stephen Innes of SPI Asset Management said in a commentary.
Producer prices for April are due later Thursday.
In Frankfurt, the DAX fell 1.8% to 13,578.21 while the CAC 40 in Paris lost 1.9% to 6,150.85. Britain’s FTSE 100 lost 2% to 7,200.33. The future for the S&P 500 was 0.2% lower while that for the Dow industrials lost 0.1%.
Hong Kong’s benchmark fell 2.2% to 19,380.34 following the arrests of several prominent democracy advocates, including a retired Roman Catholic cardinal.
The arrests of Cardinal Joseph Zen, singer Denise Ho and others followed the choice last weekend of a hardline chief executive for the semi-autonomous Chinese territory, where Beijing has been tightening controls after taking control of the former British colony in 1997.
In other Asian trading, Tokyo’s Nikkei 225 gave up 1.8% to 25,748.72.
The Shanghai Composite index shed 0.1% to 3,054.99. Australia’s S&P/ASX 200 lost 1.8% to 6,941.00. South Korea’s Kospi slipped 1.6% to 2,550.08.
Wednesday on Wall Street, the S&P 500 fell 1.6%, wiping out gains from a day before. The Dow Jones Industrial Average dropped 1% and the Nasdaq fell 3.2% as tech stocks weighed down the broader market. The three major indexes are each on pace for another sharp weekly loss.
Smaller company stocks also lost ground. The Russell 2000 fell 2.5%.
Economists said the inflation report will keep the Fed on track for rapid and potentially sharp increases in interest rates in upcoming months.
To corral high inflation, the Fed has already pulled its key short-term interest rate off its record low near zero, where it spent most of the pandemic. It also said it may continue to hike rates by double the usual amount at upcoming meetings.
Such moves are designed to slow the economy to help quash inflation, but the Fed risks causing a recession if it raises rates too high or too quickly. Higher rates tend to pull prices for stocks and all kinds of investments lower in the meantime. Higher-yielding, safe Treasury bonds, for example, become more attractive to investors.
Higher rates make big technology companies, other high-growth stocks and even cryptocurrencies relatively less appealing.
In other trading, benchmark U.S. oil dropped $2.63 to $103.08 per barrel in electronic trading on the New York Mercantile Exchange. It gained 6% on Wednesday.
Brent crude, the international pricing standard, shed $2.41 to $105.10 per barrel. It added 4.9% the day before.
The dollar slipped to 128.50 Japanese yen from 129.95 yen. The euro fell to $1.0460 from $1.0517.
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