Global shares fall amid worries about inflation, oil prices

Global shares fall amid worries about inflation, oil prices

Global shares were mostly lower on Thursday as investors watched for fresh signs of inflation, including soaring crude oil prices.

European shares declined in early trading. France’s CAC 40 slipped 0.7 per cent in early trading to 6,404.59, while Germany’s DAX dropped 0.9 per cent to 14,309.79. Britain’s FTSE 100 fell 0.7 per cent to 7,543.28.

Benchmarks declined across Asia, except in Tokyo, where a weakening yen sent issues of some Japanese exporters higher. Nintendo Co. issues surged 1.6 per cent, while Honda Motor Co. stocks gained more than 0.6 per cent.

The Japanese yen has recently slid to fresh 20-year lows against the US dollar, a trend the International Monetary Fund and other analysts expect to continue for a while because of higher interest rates in the US and Europe, compared to Japan, where long-term interest rates remain at near-zero.

The dollar was trading at 133.55 Japanese yen after hitting 134 yen levels earlier in the day, down from 134.20 yen late on Wednesday. The euro cost USD 1.0700, down from USD 1.0718.

The Governing Council of the European Central Bank is holding a monetary policy meeting later in the day. Comments from Christine Lagarde, head of the European Central Bank, have markets anticipating an interest rate hike in July, with possibly more to follow.

“Nonetheless, the economic recovery remains fragile and subject to down side risks from geo-political risks, eroding real incomes, supply chain constraints and limited fiscal support,” said Venkateswaran Lavanya of the Asia and Oceania Treasury Department at Mizuho Bank in Singapore.

“To that end, ECB will not want to throw the baby out with the bath water; calibrating monetary tightening in a more sustained, even if slow, pace,” she said in a commentary.

Japan’s benchmark Nikkei 225 inched up less than 0.1 per cent to finish at 28,246.53.

Australia’s S and P/ASX 200 slipped 1.4 per cent to 7,019.70. South Korea’s Kospi ended little changed, inching down less than 0.1 per cent to 2,625.44.

Hong Kong’s Hang Seng shed 0.7 per cent to 21,869.05, while the Shanghai Composite lost 0.8 per cent to 3,238.95.

The impact from inflation has worsened since Russia’s invasion of Ukraine, which has put more pressure on energy and food prices.

In energy trading, benchmark US crude slid 42 cents to USD 121.69 a barrel. It gained USD 2.70 on Wednesday.

Brent crude, the international standard for pricing oil, lost 30 cents to USD 123.28 a barrel.

China reported its exports surged 17 per cent over a year earlier in May to USD 308.3 billion, up from April’s 3.7 per cent growth, as coronavirus precautions were eased in Shanghai and other cities.

Imports rose four per cent to USD 229.5 billion, accelerating from the previous month’s 0.7 per cent growth.

China’s trade has been slowed by weak export demand and curbs imposed to fight outbreaks in Shanghai and other cities.

Consumer demand for imports was crushed by rules that confined millions of families to their homes, sometimes for weeks. But most factories, shops and other businesses in Shanghai, Beijing and other cities have been allowed to reopen.

The Federal Reserve is widely expected to raise its key short-term interest rate by half a percentage point at its meeting next week. That would be the second straight increase of double the usual amount by the US central bank, and investors expect a third in July.

The big concerns on Wall Street remain rising inflation and whether the Fed’s shift to aggressively raising interest rates will help temper the impact or possibly push the economy into a recession.

The Fed’s goal is to slow economic growth enough to cushion inflation’s impact.

Demand for goods had been outpacing supplies and production capacity through most of the post-pandemic recovery. But, investors worry the Fed could go too far too fast in raising rates, nudging the US economy into a recession.

The next big update on inflation arrives Friday, when the US government releases its latest reading on the consumer price index.