Global stocks were mixed on Tuesday as investors awaited a decision from the US Federal Reserve on interest rates.
Benchmarks rose in Hong Kong, Paris and Frankfurt but fell in Sydney and London. Trading was light, with markets in mainland China, Japan and some other countries closed for the holidays.
Oil prices fell and US futures rose slightly.
Australia’s central bank raised its benchmark interest rate to 0.35% from 0.1%, the first such hike since 2010. The Fed is expected to announce a rate hike on Wednesday as it and others central banks are fighting inflation which is hovering at 40-year highs.
Australia’s S&P/ASX 200 fell 0.5% to 7,307.50 on Tuesday.
Investors are also expecting another rate hike by the US Federal Reserve as it and other central banks step up efforts to curb inflation. The central bank is expected to raise short-term interest rates to double the usual amount when it releases its latest statement on Wednesday. It has already raised its key overnight rate once, for the first time since 2018, and Wall Street expects several big hikes in the coming months.
It will make borrowing more expensive – for a car, a house, a credit card purchase and could weaken the economy. It would also attract investment from equities to other assets as their returns rise. Ultra-low interest rates helped push stocks to all-time highs during the pandemic and now that process is being reversed.
In early European trading, the German DAX rose 0.6% to 14,021.72 while the CAC 40 in Paris rose 0.8% to 6,479.88. Britain’s FTSE 100 fell 0.4% to 7,518.50.
In Asia, the Hong Kong Hang Seng edged up 0.1% to 21,101.89. The index had rallied earlier in the day on hopes of further relaxation of coronavirus prevention rules. But he failed to hold on to those gains. The government said the territory’s economy contracted by 4% in annual terms in the first quarter of the year.
In South Korea, the Kospi fell 0.3% to 2,680.46. Shares also fell in Taiwan and Thailand.
On Monday, a late afternoon reversal led by tech stocks left major indexes slightly higher on Wall Street, avoiding more losses after a brutal April when a tech selloff dragged major benchmarks down.
The S&P 500 rose 0.6% and the Dow Jones Industrial Average gained 0.3%. The Nasdaq climbed 1.6%. The Russell 2000 Index rose 1% to 1,882.91.
Concerns about rising inflation are weighing on the latest set of corporate results. This week brings more, with Pfizer reporting results on Tuesday, CVS Health on Wednesday and Kellogg on Thursday.
The 10-year Treasury yield was 2.98% after hitting 3.00% on Monday. It had not exceeded 3% since December 3, 2018, according to Tradeweb.
Higher yields make bonds increasingly attractive assets relative to riskier and more expensive stocks, especially those in technology and other growth-oriented companies.
European energy ministers were meeting in Brussels to discuss Russian supply problems and sanctions. Russia’s invasion of Ukraine caused already high oil and natural gas prices to spike.
Benchmark U.S. crude oil fell US$1.11 to $104.06 a barrel in electronic trading on the New York Mercantile Exchange. It gained 48 cents to $105.17 a barrel on Monday.
Brent crude fell $1.18 to $106.40 a barrel.
In currency trading, the dollar was at 130.13 Japanese yen, down from 130.15 yen on Monday. The euro fell to $1.0500 from $1.0505.
Associated Press writer Rod McGuirk contributed.