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Global stocks plunge in muted trading ahead of Fed meeting

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TOKYO — Global stocks fell in muted trading on Tuesday as investors awaited interest rate decisions and updates on corporate earnings reports from around the world.

The Federal Reserve’s next interest rate decision, expected Wednesday, will provide insight into whether the US central bank will further ease its aggressive stance on fighting 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 almost 0.3% to 15,087.53. The UK FTSE 100 fell 0.3% to 7,760.82. Futures for the Dow Industrials fell 0.3%, while the contract for the S&P 500 lost 0.4%.

In a positive sign, the IMF said the global outlook has improved slightly as China eases its zero-COVID policy and economies are surprisingly resilient despite high inflation, high interest rates and Russia’s ongoing war against Ukraine.

Meanwhile, a study published Tuesday showed Chinese factory activity rebounded in January, adding to signs that the world’s second-largest economy would bounce back from a painful slump.

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The Japanese benchmark Nikkei 225 fell 0.4% to close at 27,327.11. Australian S&P/ASX 200 fell nearly 0.1% to 7,476.70. The South Korean Kospi fell 1.0% to 2,425.08. The Hong Kong Hang Seng lost 1.0% to 21,839.64, while the Shanghai Composite lost 0.4% to 3,255.67.

China’s rapid reopening has bolstered domestic growth prospects, mild weather in Europe has greatly reduced recession risk, and a string of better inflation news has raised hopes that the Fed will be able to deliver a ‘soft landing’. in the US,” he said. Stephen Innes, managing partner at SPI Asset Management.

“Despite these shifts, recession risk in the US remains a major concern and is perhaps the greatest risk to the global cyclical picture,” he said.

Separately, Japan’s industrial production index fell slightly in December 2022, down 0.1% month-on-month, after rising 0.2% in the previous month.

“Weak external demand and semiconductor shortages remain near-term manufacturing headwinds,” said Harumi Taguchi, chief economist at S.&P Global market information.

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Markets have been agitated lately on concerns that the economy and corporate earnings will take a sharp downturn, along with competing hopes that the cooling of inflation will lead the Federal Reserve to ease up 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, following a wave 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 deliberately slowing the economy, while also depressing investment prices. Inflation has been cooling since the summer amid last year’s storm of rate hikes, but the economy is also showing signs of concern.

Central banks for Europe and for the United Kingdom will also announce their latest rate hikes this week.

Interest rates aside, more than 100 companies in the S&P 500 are scheduled this week to report how much profit they made in the last three months of 2022. Among them are tech heavyweights Apple, Amazon and parent company Google.

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Later this week, the US government will also publish its latest monthly update on the labor market. Hiring has remained resilient across the economy, even as homes and other sectors are weakening sharply under the weight of all of last year’s Fed rate hikes.

Economists expect Friday’s report to show that U.S. employers added 187,500 more jobs in January than they cut. That would be a delay from the hiring of 223,000 in December.

In energy trading, US benchmark 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 at $77.90 a barrel.

Brent crude, the international standard, fell $1.02 to $83.48 a barrel.

In currency trading, the US dollar fell from 130.43 yen to 130.15 Japanese yen. The euro was priced at $1.0816, down from $1.0852.


Yuri Kageyama is on Twitter https://twitter.com/yurikageyama