Stubborn inflation weighs on U.S. and global markets

NEW YORK (AP) — Wall Street opened Thursday pointing to another day of losses as more evidence stubborn inflation has led to a sell-off in Asia and Europe.

S&P 500 futures fell 0.5% and the Dow Jones Industrial Average fell 0.3% after a U.S. government report showed inflation remained near a four-year high.

Inflation slowed slightly in April to 8.3% from 8.5% in March, according to the U.S. Labor Department. But the drop was smaller than expected, reinforcing expectations that the Fed will continue to raise interest rates to counter rising inflation. price.

Economists expect U.S. data on Thursday to show that the cost of goods before they reach consumers, known as producer prices, will continue to rise. These costs can be passed on to consumers as companies are forced to pay higher fees.

Also on Thursday, Britain said its economy grew at its slowest pace in a year in the first quarter as retailers and manufacturers struggled amid supply disruptions and higher prices. That has sparked fears that the country may be heading for a recession.

Gross domestic product, the broadest measure of economic activity, rose 0.8 percent in the period, down from 1.3 percent in the previous quarter, the Office for National Statistics said on Thursday. Retail sales figures show that UK consumers are already cutting back. Economists predict the UK’s standard of living will fall by the most in more than 60 years this year.

Britain’s FTSE 100 was down 2 percent in midday trade, Germany’s DAX was down 1.8 percent and the Paris CAC 40 was down 2.1 percent.

In Asia, promises by Chinese leaders to provide more support for a slowing economy appear to have had little effect.

Hong Kong’s benchmark index fell 2.2 percent to 19,380.34 after several prominent democracy advocates, including a retired Roman Catholic cardinal, were arrested.

Cardinal Joseph Cen, singer Stanley Ho and others were arrested last weekend after the selection of a hard-line chief executive for the semi-autonomous Chinese territory, which Beijing has been tightening since it took control of the former British colony in 1997.

In other Asian trade, Tokyo’s Nikkei 225 fell 1.8% to 25,748.72.

The Shanghai Composite fell 0.1 percent to 3,054.99. Australia’s S&P/ASX 200 fell 1.8% to 6,941.00. The KOSPI dropped 1.6 percent to 2,550.08.

Economists say the U.S. inflation report will allow the Federal Reserve to raise interest rates quickly and potentially sharply in the coming months.

In an effort to rein in high inflation, the Fed has pulled its key short-term interest rate down from historic lows near zero, where most of the pandemic has been spent. It also said it may go ahead with doubling interest rates at an upcoming meeting.

Such moves are designed to slow economic growth to help curb inflation, but could trigger a recession if the Fed raises rates too much or too quickly. At the same time, higher interest rates tend to pull down the prices of stocks and various investments. For example, higher-yielding, safe Treasury bonds are more attractive to investors.

Higher interest rates make big tech companies, other high-growth stocks and even cryptocurrencies relatively less attractive.

Bitcoin continued to slide, dipping as low as around $25,000 on Thursday, dragging down a slew of other digital currencies. In the past week alone, bitcoin has lost 28% of its value and is down 60% from its highs of nearly $70,000 late last year.

In other trades, U.S. benchmark oil fell $1.26 to $104.45 a barrel in electronic trading on the New York Mercantile Exchange. It rose 6% on Wednesday.

Brent crude, the international benchmark, fell $1.41 to $106.10 a barrel. It rose 4.9% the previous day.

The dollar fell to 128.58 yen from 129.95 yen. The euro fell to $1.0408 from $1.0517.

Copyright © 2022 The Washington Times LLC.

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