Global Stocks Sink After Fed Discusses Cut In US Stimulus
BEIJING (AP) — Global stock markets and Wall Street futures fell Thursday after the Federal Reserve talked about possibly reducing U.S. economic stimulus. Japan was preparing to declare a coronavirus state of emergency during the Olympics due to a surge of infections.
London and Frankfurt opened more than 1% lower while Shanghai, Tokyo and Hong Kong also retreated. The future for Wall Street's benchmark S&P 500 index was off 1%, retreating from Wednesday's record high.
Also Thursday, South Korea reported a one-day record increase of 1,275 new coronavirus infections, adding to gloom about the disease.
Minutes of the Federal Reserve’s latest meeting in June gave an upbeat outlook for a U.S. economy recovery and showed board members discussed how and when they might reduce monthly bond purchases that inject money into the financial system.
“With the initial heavy lifting from economic reopening mostly factored in, the pace of reduction in unemployment rate ahead carries some uncertainty,” said Yeap Jun Rong of IG in a report. “The Fed minutes reinforces that much awaits to be seen in the data ahead to guide policies pullback.”
In early trading, the FTSE 100 in London lost 1.4% to 7,047.80 while the DAX in Frankfurt shed 1.4% to 15,477.08. The CAC 40 in Paris fell 1.9% to 6,403.30.
On Wall Street, the future for the Dow Jones Industrial Average also was off 1.2%. That for the S&P 500 lost 1.1%.
On Tuesday, the benchmark S&P 500 and Dow both rose 0.3%. The Nasdaq composite gained less than 0.1% to a new high.
Apple rose 1.8%, Otis added 2% and Biogen gained 3%. Energy and other sectors slid.
In Asia, Nikkei 225 in Tokyo lost 0.9% to 28,118.03. Prime Minister Yoshihide Suga is set to declare a state of emergency in Tokyo from Monday through Aug. 22, due to the pandemic. Possible measures include closing bars and restaurants that serve alcohol and a request to the public to stay home. City leaders also have the option of shutting department stores and other businesses.
The Shanghai Composite Index lost 0.8% to 3,525.50 after the Chinese Cabinet announced it will free up more money for lending by reducing the amount of deposits banks are required to hold in reserve.
The Hang Seng in Hong Kong fell 2.9% to 27,153.13, hurt by declines for Chinese tech stocks. They have been hit by increased enforcement of anti-monopoly and other rules including an order to ride-hailing service Didi to stop taking on new users while it overhauls how it handles customer data. E-commerce giant Alibaba Group lost 4.1% and entertainment and social media operator Tencent Holding Ltd. slid 3.7%.
In South Korea, the Kospi lost 1% to 3,252.68.
India's Sensex fell 1.1% to 52,484.64. New Zealand gained while Singapore, Jakarta and Bangkok retreated.
Investors have swung between enthusiasm about an economic recovery and unease that the Fed and other central banks might roll back stimulus to cool pressure for prices to rise.
The Fed minutes showed officials are moving closer to reducing bond purchases, though most analysts don’t expect a reduction until late this year. At their previous meeting, policymakers said they planned to raise interest rates as soon as 2023, earlier than previously expected.
“The Fed’s minutes showed that a taper announcement still seems poised for the August/September time frame,” said Edward Moya of Oanda in a report. “The Fed has already pointed out they are a little nervous about inflation, and the minutes confirmed that fear.”
In energy markets, benchmark U.S. crude lost $1.12 to $71.08 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.17 to $72.20 on Wednesday. Brent crude, the price basis for international oils, shed 95 cents to $72.48 per barrel in London. It sank $1.10 the previous session to $73.43.
The dollar declined to 109.92 yen from Wednesday's 110.63 yen. The euro advanced to $1.1823 from $1.1805.