U.S. futures rose as new data showed inflation hit a four-decade high, adding to investor unease over rising interest rates, Chinese efforts to contain coronavirus outbreaks and to Russia’s war against Ukraine.
London, Frankfurt, Tokyo and Seoul fell. Shanghai and Hong Kong grew. Oil prices rose more than $3 a barrel.
Inflation has soared over the past year at its fastest rate in more than 40 years, the Labor Department reported on Tuesday, as the costs of food, gas, housing and other necessities pressing American consumers and wiping out the pay raises many people have received.
Markets are worried about plans by the Federal Reserve and other central banks to try to rein in inflation by rolling back ultra-low interest rates. Adding to their anxiety is Russia’s attack on Ukraine and China’s decision to shut down most businesses in its commercial capital Shanghai to fight coronavirus outbreaks.
“All eyes are now on the US CPI for March,” which is expected to hit 8.4% a year ago, ING analysts said in a report. “A number in this neighborhood should maintain aggressive Fed tightening expectations,” they said.
In early trading, the FTSE 100 in London fell 0.6% to 7,573.6 and the DAX in Frankfurt fell 0.8% to 14,082.1. The CAC 40 in Paris fell 0.5% to 6,524.2.
On Wall Street, the benchmark S&P 500 index futures and the Dow Jones Industrial Average gained 0.74% and 0.36%, respectively.
On Monday, the S&P slid 1.7% and the Dow fell 1.2%. The Nasdaq sank 2.2%.
In Asia, the Shanghai Composite Index gained 1.5% to 3,213.33 after authorities announced they would ease anti-coronavirus controls that shuttered most businesses in China’s most populous city and interfered with production.
The Hang Seng in Hong Kong climbed 0.5% to 21,319.13 while the Nikkei 225 in Tokyo fell 1.8% to 26,334.98.
Seoul’s Kospi fell 1% to 2,666.76 and Sydney’s S&P-ASX 200 fell 0.4% to 7,454.00.
The Indian Sensex fell 0.5% to 58,685.08. Jakarta rose while New Zealand and other Southeast Asian markets declined.
Tuesday’s economic data shows that inflation is approaching the inflection point where Americans could start cutting spending, which would likely mean a sharper-than-expected slowdown in economic growth.
Investors are anticipating a more aggressive shift from the Fed as it attempts to rein in rising inflation. The central bank has already announced an increase of a quarter of a percentage point in its key rate.
Fed officials said in the minutes of last month’s meeting that they plan to raise the U.S. benchmark rate to double the normal amount in future meetings. They also indicated that they would reduce Fed bond holdings, which would push up long-term borrowing rates.
Oil prices fell on expectations of weaker Chinese demand after most Shanghai businesses closed and controls were imposed on other industrial hubs to contain coronavirus outbreaks. Prices soared above $130 a barrel last month on concerns over a possible disruption in Russian supplies.
Automakers and other manufacturers in China are cutting production after authorities tightened restrictions to help stem coronavirus outbreaks in Shanghai and other cities.
Benchmark U.S. crude gained $3.70 to $98 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell from $3.97 on Monday to $94.29. Brent crude, the price basis for international oil trade, added $4.05 to $102.53 a barrel in London. It fell from $4.30 the previous session to $98.48.
The dollar rose to 125.63 Japanese yen from 125.46 yen on Monday. The euro fell from $1.0890 to $1.0870.