Global stocks tumble after Fed signals faster rate hikes
BEIJING (AP) — Global stocks and Wall Street futures tumbled Thursday after investors saw minutes from a Federal Reserve meeting as a sign the U.S. central bank might hike interest rates faster to cool inflation.
Benchmarks in London and Frankfurt opened down more than 1% while Tokyo lost nearly 3%.
Notes from the Fed meeting last month showed policymakers believe the U.S. job market is nearly healthy enough that ultra-low rates are no longer needed. Traders took that as a sign the Fed might be more aggressive about rolling back stimulus that is boosting stock prices.
The report “bludgeoned the markets” by upsetting expectations that earlier Fed plans were locked in, Vishnu Varathan of Mizuho Bank said in a report.
On Wall Street, the future for the benchmark S&P 500 index was off 0.3% and that for the Dow Jones Industrial Average was down 0.2%.
On Wednesday, the S&P 500 slid 1.9% and the Dow sank 1.1%. The Nasdaq composite tumbled 3.3% in its biggest one-day decline in 11 months.
In Asia, the Nikkei 225 in Tokyo fell 2.9% to 28,487.87 and the Shanghai Composite Index lost 0.2% to 3,586.08. The Hang Seng in Hong Kong ended up 0.7% at 23,072.86 following a rally late in the session.
The Kospi in Seoul retreated 1.1% to 2,920.53 and Sydney’s S&P-ASX 200 sank 2.7% to 7,358.30.
India’s Sensex declined 1.3% to 59,546.57. New Zealand, Bangkok and Jakarta declined while Singapore gained.
The Fed indicated in mid-December that plans to wind down stimulus would be accelerated after U.S. consumer inflation hit a 39-year high.
That jolted investors who had been encouraged by stronger corporate profits and the spread of coronavirus vaccinations. Despite that, the S&P 500 ended 2021 with a 26.9% annual gain.
Bond yields, or the difference between the day’s market price and the payout at maturity, widened Wednesday after the Fed notes came out.
The yield on the 10-year Treasury note, a benchmark for setting rates on mortgages and other loans, rose to 1.70% from 1.68%.
The Fed minutes showed policymakers expressed concern that inflation was spreading into more areas of the economy and would last longer than expected. They discussed the possible need to raise short-term interest rates at a quicker pace and allow bond purchases that inject money into the financial system to decline sooner.
Four out of five stocks in the S&P 500 fell. Tech companies were the biggest drag on the market. Microsoft fell 3.8% and software maker Adobe shed 7.1%.
In energy markets, benchmark U.S. crude lost 25 cents to $77.60 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 86 cents to $77.85 on Wednesday. Brent crude, the price basis for international oils, sank 33 cents to $80.47 per barrel in London. It rose 80 cents the previous session to $80.80.
The dollar declined to 115.74 yen from Wednesday’s 116.16 yen. The euro declined to $1.1293 from $1.1311.
Joe Mcdonald, The Associated Press