World shares mixed ahead of Fed rate hike decision
By Elaine Kurtenbach, The Associated Press on December 14, 2022.
BANGKOK (AP) – World shares are mixed ahead of a decision by the Federal Reserve on its final interest rate hike for the year. London, Paris and Frankfurt declined while shares in Asia were higher. U.S. futures edged lower and oil prices also fell. A 7.1% U.S. consumer price index reading for November has raised hopes that pressure on the economy may ease, with the Fed widely expected to raise its benchmark rate a half-point Wednesday, smaller than the past four hikes of three-quarters of a point. Rate decisions by the Bank of England and European Central are expected Thursday. Germany’s DAX slipped 0.6% to 14,407.75, while the CAC 40 in Paris also lost 0.6% to 6,704.70. Britain’s FTSE 100 gave up 0.4% to 7,471.04. The futures for the Dow and the S&P 500 were little changed. The Bank of Japan’s latest quarterly “tankan” survey showed a deterioration in business conditions for major Japanese manufacturers, reflecting higher costs for industrial inputs and energy and weaker demand as the Fed and other central banks raise interest rates to tame inflation. The headline index for large manufacturers was 7, down from 8 in the previous quarter and the fourth straight quarter of declines. The tankan measures corporate sentiment by subtracting the number of companies saying business conditions are negative from those responding they are positive. Conditions for nonmanufacturers, such as service industries, rose to 19 from 14, as Japan lifted pandemic precautions and reopened to foreign tourists. “Today’s Tankan survey suggests that while the services sector is going from strength to strength, the outlook for the manufacturing sector continues to worsen,” Darren Tay of Capital Economics said in a commentary. He noted that capital spending projections also weakened slightly. Tokyo’s Nikkei 225 advanced 0.7% to 28,156.21 and the Hang Seng in Hong Kong added 0.4% to 19,673.45. South Korea’s Kospi was up 1.1% at 2,399.25. The Shanghai Composite index was virtually unchanged, at 3,176.53. In Australia, the S&P/ASX 200 gained 0.7% to 7,251.30. India’s Sensex gained 0.7% while the SET in Bangkok added 0.4%. On Tuesday, the S&P 500 rose 0.7% and the Nasdaq composite gained 1%. The Dow Jones Industrial Average picked up 0.3%. The Russell 2000 index rose 0.8%. Stocks pared earlier back gains as analysts cautioned investors not to get carried away by hopes for an easier Fed, the detail of the inflation data “under the hood being less encouraging than it is on the surface,” Mizuho Bank economists said in a report. They noted that core services prices were up 0.4% from a month earlier, distorting inflation risks. “To be precise , the headline understates underlying inflation risks that concern the Fed,” the report said. Tuesday’s report offered hope that the worst of inflation really did pass during the summer, though prices are painfully high. A Fed rate hike of 0.50 percentage points would usually be a big deal because it’s double the typical move. But with inflation coming off its worst level in generations, it would be a step down from the four hikes of 0.75 percentage points the Fed has approved since the summer. Some of Wall Street’s wildest action Tuesday was in the bond market, where yields fell sharply immediately after the inflation report’s release. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, fell to 3.49% from 3.62% late Monday. The two-year yield, which more closely tracks expectations for the Fed, dropped to 4.22% from 4.39%. Even if inflation is finally abating, the global economy still is threatened by the rate increases already pushed through. The housing industry and other businesses that rely on low interest rates have shown particular weakness, and worries are rising about the strength of corporate profits broadly. In other trading, U.S. benchmark crude shed 2 cents to $75.37 per barrel in electronic trading on the New York Mercantile Exchange. It jumped $2.22 on Tuesday to $75.39 per barrel. Brent crude, the pricing basis for international trading, shed 1 cent to $80.67 per barrel. The dollar slipped to 135.14 Japanese yen from 135.59 yen. The euro rose to $1.0664 from $1.0633. 25-24
