Global stocks tumble after US inflation edges higher

Beijing Global stock markets declined Friday after US inflation edged higher, fuelling unease about the outlook for the biggest global economy.

London, Shanghai, Paris and Hong Kong fell. Wall Street futures were mixed. Japanese markets were closed for a holiday. Oil prices edged lower. Wall Street’s benchmark S&P 500 index gained less than 0.1 per cent on Thursday after government data showed consumer prices rose 3.2 per cent in July. That was higher than the previous month but below forecasts following repeated rate hikes to cool business activity and prices. Traders hope the Federal Reserve will decide inflation that peaked above 9 per cent last year is under control and no more interest rate hikes are needed. Investors are watching whether higher interest expenses “will cause distress or defaults,” said Stephen Innes of SPI Asset Management in a report.

In early trading, the FTSE 100 in London lost 1 per cent to 7,546.40. The CAC 40 in Paris fell 0.8 per cent to 7,373.90 and the DAX in Frankfurt retreated 0.6 per cent to 15,905.59. On Wall Street, the S&P 500 future was off less than 0.1 per cent. That for the Dow Jones Industrial Average was up 0.8 per cent. On Thursday, the Dow gained 0.2 per cent and the Nasdaq composite added 0.1 per cent. US inflation in July was up from the previous month’s 3 per cent, but below forecasts of 3.3 per cent. Beneath the surface, underlying trends for inflation were also within expectations. The readings bolstered hopes among investors that the Federal Reserve’s anti-inflation campaign worked and no more rate hikes are needed. They hope the Fed can achieve a “soft landing” by cooling inflation without tipping the economy into recession.

In Asia, the Shanghai Composite Index lost 2 per cent to 3,189.24 and the Hang Seng in Hong Kong fell 0.9 per cent to 19,075.19. The Kospi in Seoul declined 0.4 per cent to 2,591.26 and Sydney’s S&P-ASX 200 sank 0.2 per cent to 7,340.10. New Zealand gained and Bangkok gained while other Southeast Asian markets declined. Critics say Wall Street might have latched on too early to a belief that inflation is under control and the Fed’s rate-hiking cycle is finished. The Fed has said its decisions on possible additional increases will be based on inflation, hiring and other data. The government is due to report wholesale inflation on Friday. More reports on inflation and hiring are due out before the Fed’s next meeting that ends September 20.