Global stock markets are mixed with action over Fed rate, COVID, and concerns over oil prices

Global stock markets are mixed with action over Fed rate, COVID, and concerns over oil prices

China has stuck to a “zero-COVID” strategy that requires lockdowns, mass testing, and isolation for those infected or who have been in contact with someone testing positive. Japan’s benchmark Nikkei 225 lost 0.2% to finish at 27,413.88. Australia’s S&P/ASX 200 shed 0.8% to 7,175.90. South Korea’s Kospi slipped 1.0% to 2,658.99. Hong Kong’s Hang Seng dipped 1.0% to 21,082.13, while the Shanghai Composite reversed earlier losses, gaining 0.4% to 3,195.46.

The Fed has signaled it may continue raising its key short-term interest rate by double the usual amount at upcoming meetings in June and July. Speculation built last week that the Fed may consider a pause at its September meeting, which helped stocks to rise. But such hopes diminished after Wednesday’s manufacturing report from the Institute for Supply Management. It showed US manufacturing growth accelerated last month, contrary to economists’ expectations for a slowdown.

The 10-year Treasury yield rose to 2.92% from 2.84% just before the report’s release. Benchmark US crude lost $2.56 to $112.70 a barrel. Oil prices rose 0.5% to settle at $115.26 on Wednesday. Brent crude, the international standard, shed $2.66 to $113.63 a barrel. In currency trading, the US dollar slid to 129.94 Japanese yen from 130.15 yen. The euro rose to $1.0695 from $1.0649.

A separate report said that the number of job openings across the economy ticked a bit lower in April but remains much higher, at 11.4 million, than the number of unemployed people. Wednesday marked the start of the Fed’s program to pare back some of the trillions of dollars of Treasurys and other bonds that it amassed through the pandemic. Such a move should put upward pressure on longer-term rates.

Story Highlights

  • France’s CAC 40 gained 1.0% in early trading to 6,481.90, while Germany’s DAX added 0.8% to 14,454.96. Markets were closed in Britain for the Platinum Jubilee marking Queen Elizabeth’s 70 years on the throne. The future for the S&P 500 futures rose 0.3% and that for the Dow industrials gained 0.5%. In China, strict COVID-19 restrictions are back in Hong Kong as infections rise, while they are gradually being lifted in Shanghai.

  • Daily market swings have become routine amid worries that too-aggressive rate hikes by the US Federal Reserve may force the American economy into a recession. Even if it can avoid choking off the economy, higher rates put downward pressure on stocks and other investments regardless. High inflation is meanwhile eating into corporate profits, while the war in Ukraine and business-slowing, anti-COVID-19 restrictions in China have also weighed on markets.