TOKYO (AP) — Global shares fell in dovish trading Tuesday as investors awaited interest rate decisions and updates on corporate earnings reports from around the world.
The Federal Reserve’s next decision on interest rates, expected on Wednesday, will provide insight into whether the US central bank will further soften its aggressive stance to combat inflation.
France’s CAC 40 was little changed, falling less than 0.1% in early trading to 7,081.34, while Germany’s DAX fell nearly 0.3% to 15,087.53. Britain’s FTSE 100 was down 0.3% at 7,760.82. The Dow Industrial future fell 0.3% while the S&P 500 contract lost 0.4%.
In a positive sign, the IMF said the global outlook it has gotten a little brighter as China relaxes its zero-COVID policies and economies show surprising resilience in the face of high inflation, skyrocketing interest rates and Russia’s ongoing war against Ukraine.
Meanwhile, a survey released Tuesday showed that Chinese factory activity picked up in January, adding to signs that the world’s second-largest economy may be recovering from a painful slump.
Japan’s benchmark Nikkei 225 index fell 0.4% to close at 27,327.11. Australia’s S&P/ASX 200 was down nearly 0.1% at 7,476.70. South Korea’s Kospi decreased 1.0% to 2,425.08. Hong Kong’s Hang Seng lost 1.0% to 21,839.64, while the Shanghai Composite lost 0.4% to 3,255.67.
“China’s swift reopening has boosted its domestic growth outlook, Europe’s mild weather has sharply reduced its risk of recession and a string of better inflation news has raised hopes that the Fed can engineer a ‘soft landing’ in the US,” he said. Stephen Innes, Managing Partner at SPI Asset Management.
“Despite these changes, the risk of a US recession remains a major concern and may be the most important risk to the global cyclical outlook,” he said.
On the other hand, Japan’s industrial production index eased slightly in December 2022, falling 0.1% on a monthly basis, after rising 0.2% the previous month.
“Weak foreign demand and semiconductor shortages remain headwinds to near-term production,” said Harumi Taguchi, chief economist at S&P Global Market Intelligence.
Markets have been sidetracked recently on concerns that the economy and corporate profits could take a sharp decline, along with conflicting hopes that cooling inflation will cause the Federal Reserve to take it easy on interest rates.
Most investors expect the Fed to announce a rate hike of just 0.25 percentage point. That would be the smallest increase since March, after a series of 0.75 point increases and then a 0.50 point increase, and would mean less pressure on the economy.
Higher rates fight inflation by intentionally slowing the economy while lowering investment prices. Inflation has been cooling since the summer amid last year’s blizzard of rate hikes, but the economy has also shown signs of concern.
The central banks of Europe and the United Kingdom will also announce their latest rate hikes this week.
Beyond interest rates, more than 100 S&P 500 companies are scheduled to report earnings this week for the last three months of 2022. Among them are tech heavyweights Apple, Amazon and Google’s parent company.
Later this week, the US government will also give its latest monthly job market update. Hiring has remained resilient across the broader economy, even as housing and other corners weaken considerably under the weight of all the Fed rate hikes since last year.
Economists expect Friday’s report to show that US employers added 187,500 more jobs than they cut in January. That would be a slowdown from December’s hiring of 223,000.
In energy trading, benchmark US crude fell $1.00 to $76.90 a barrel in electronic trading on the New York Mercantile Exchange. On Monday it was down $1.78 to $77.90 a barrel.
Brent crude, the international standard, fell $1.02 to $83.48 a barrel.
In currency trading, the US dollar fell to 130.15 Japanese yen from 130.43 yen. The euro cost $1.0816, down from $1.0852.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
