Global shares track Wall Street slide on rate expectations

By YURI KAGEYAMA
AP Business Writer

TOKYO (AP) — Global shares were lower Thursday, tracking a broad slide on Wall Street, as investors braced for higher interest rates and inflation worries for some time.

France’s CAC 40 declined 1.6% to 6,025.93 in early trading, while Germany’s DAX slipped 1.6% to 12,633.32. Britain’s FTSE 100 was down 1.6% at 7,164.45. U.S. shares were set to drift lower, with Dow futures falling 0.6% to 31,350.00 and S&P 500 futures declining nearly 0.8% to 3,926.00.

Benchmarks finished lower in Asia. Japan’s benchmark Nikkei 225 dipped 1.5% to finish at 27,661.47. Australia’s S&P/ASX 200 dropped 2.0% to 6,845.60. South Korea’s Kospi shed 2.3% to 2,415.61. Hong Kong’s Hang Seng lost 1.8% to 19,597.31, while the Shanghai Composite declined 0.5% to 3,184.98. Oil prices fell.

The slide in the Nikkei came despite signs of improvement in the Japanese economy. A study by the Finance Ministry on corporate financial statements for April-June showed a 17.6% improvement from the same period the previous year.

“At some point central banks will discover inflation is remaining high despite their interest rate hikes and they will stop. Unfortunately, for the economy on Main Street, that point is too far off in the distance. It is difficult to see any near-term end in sight for increased caution by consumers and businesses across Europe, China, and the U.S.A.,” said Clifford Bennett, chief economist at ACY Securities.

The latest pullback for stocks came as Treasury yields rose broadly. The yield on the 10-year Treasury, which influences interest rates on mortgages and other consumer loans, rose to 3.17% from 3.11% late Tuesday.

Bond yields have been rising along with expectations of higher interest rates, which the Federal Reserve has been increasing in a bid to squash the highest inflation in decades.

The last time stocks mounted a big rally was in July and early August, when bond yields came off their highs as expectations of higher rates eased. Higher interest rates also hurt investment prices, especially for pricier stocks such as technology companies.

Traders are now trying to get a better sense of how far and how quickly the Fed’s rate hikes will go. The Fed has already raised interest rates four times this year and is expected to raise short-term rates by another 0.75 percentage points at its September meeting, according to CME Group.

In energy trading, benchmark U.S. crude fell $1.34 to $88.21 a barrel. Brent crude, the international standard, slipped $1.40 to $94.24 a barrel.

In currency trading, the U.S. dollar rose to 139.21 yen from 139.04 yen. The euro cost $1.0038, down from $1.0054.

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