Federal Reserve: Global equities, oil price up ahead of likely US interest rate hike

Major global stock markets and Wall Street futures advanced on Wednesday as traders braced for a possible sharp interest rate hike by the Federal Reserve to calm soaring inflation.

London and Frankfurt opened higher. Tokyo and Sydney gained while Shanghai fell. Oil prices have risen.

The Fed is expected to announce on Wednesday an increase of up to three-quarters of a percentage point in its benchmark interest rate, triple its usual margin. Investors fear that such aggressive action by the Fed and other central banks in Europe and Asia to control inflation, which is at multi-decade highs, could derail global economic growth.

“The main risk at this stage is actually an inflation overkill with too sharp a monetary tightening, pushing up the unemployment rate unnecessarily,” said Thomas Costerg of Pictet Wealth Management in a report. Costerg said most economic indicators and falling commodity prices already point to an inflation slowdown ahead.

In early trading, the FTSE 100 in London rose 0.5% to 7,345.81. Frankfurt’s DAX rose 0.3% to 13,136.88 and Paris’ CAC 40 rose 0.3% to 6,230.48.

The Future of Wall Street’s S IndexThe &P 500 index rose 0.9% and the Dow Jones Industrial Average added 0.4%.

Tuesday, the S&P 500 fell 1.2% after Walmart warned inflation that hit a four-decade high of 9.1% was hurting U.S. consumer spending.

The Dow Jones fell 0.7% and the Nasdaq composite closed down 1.9%.

In Asia, the Shanghai Composite Index fell less than 0.1% to 3,275.76 while Tokyo’s Nikkei 225 rose 0.2% to 27,715.75. The Hang Seng in Hong Kong fell 1.4% to 20,620.10.

The S of Sydney&P-ASX 200 added 0.2% to 6,823.20 after data showed Australian inflation rose from 5.1% to 6.1% last quarter, but the increase was smaller than intended.

Seoul’s Kospi gained 0.1% to 2,415.53 and India’s Sensex rose 0.8% to 55,715.95. New Zealand fell while Southeast Asian markets rose.

On Wall Street, other major retailers also fell on Tuesday following Walmart’s profit warning. Target fell 3.6%, Macy’s slipped 7.2% and Kohl’s fell 9.1%.

Tech stocks fell. Microsoft fell 2.7%, Amazon fell 5.2% and Facebook owner Meta Platforms fell 4.5%.

General Motors fell 3.4% after its second-quarter profit fell 40% from a year ago. Sales in the United States fell 15% after shortages of processor chips and other components prevented the company from delivering 95,000 vehicles in the quarter.

In energy markets, benchmark U.S. crude rose $1.17 to $96.15 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell from $1.72 on Tuesday to $94.98. Brent crude, the price base for international oils, added 94 cents to $100.40 a barrel in London.

The dollar rose to 136.90 yen from 136.00 yen on Tuesday. The euro gained $1.0138 from $1.0120.

Copyright © 2022 by The Associated Press. All rights reserved.


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