Global stocks plunge on inflation, supply chain concerns

BEIJING (AP) – Global stock markets and Wall Street futures sank on Monday after the Federal Reserve indicated it could raise interest rates more aggressively to pacify US inflation and President Emmanuel Macron of France. The first round of elections is facing a challenge from afar.

London and Frankfurt opened lower. Shanghai, Tokyo and Hong Kong withdrew. Oil fell by more than $2 a barrel on worries about weakening global economic growth.

Investors are uneasy about high interest rates, Russia’s war on Ukraine and China’s effort to contain the coronavirus outbreak.

Fed officials indicated in notes from last month’s meeting that they were considering raising the US benchmark rate by twice the normal amount in upcoming meetings. They also indicated they could reduce the Fed’s bond holdings, which could raise commercial lending rates.

Stephen Innes of SPI Asset Management said in a report that investors see “growing evidence the Federal Reserve will take a more committed approach” to fighting inflation.

In early trade, the FTSE 100 in London fell 0.3% to 7,644.69 and Frankfurt’s DAX fell 0.3% to 14,241.45.

The CAC 40 in Paris rose 0.7% after Macron said his battle with National Rally’s rival Marine Le Pen for the April 24 second round of voting would be an uphill battle. Both were finalists in the last presidential election held five years ago.

“The market looks volatile two weeks before final results are known,” ING’s Charlotte de Montpellier and Antoine Bouvet said in a report.

On Wall Street, the benchmark S&P 500 index was down 0.4% and the Dow Jones Industrial Average was down 0.2%.

The S&P 500 lost 0.3% and the Dow 0.4% on Friday. The Nasdaq Composite fell 1.3%.

Higher interest rates typically reduce economic activity and make safer assets like bonds more attractive, making stocks riskier and more expensive.

Some worry that the Fed, after being accused of reacting too late to rising inflation, could make the brakes too hard and propel the world’s largest economy into recession. Deutsche Bank economists last week forecast a US recession by the end of next year.

In Asia, the Shanghai Composite Index fell 2.6% to 3,167.13, after inflation fell to 1.5% in March from a year earlier, from 0.9% last month on global prices due to uncertainty about Russia’s war on Ukraine. It was under pressure.

Analysts at Nomura said in a report that inflation “could limit room for interest rate cuts” to spur Chinese economic growth.

In China too, automakers and other manufacturers are reducing production due to supply disruptions, as authorities tighten anti-disease controls in Shanghai and other cities to contain the coronavirus outbreak.

Automaker BYD fell 4.5% and Dongfeng Motor Group Co fell 3.6%. Technology firms also fell over reports of plans for further regulatory action in the industry.

The Nikkei 225 in Tokyo fell 0.6% to 26,821.52 and Hong Kong’s Hang Seng retreated 3% to 21,208.30.

The S&P-ASX 200 rose 0.1% to 7,485.20 in Sydney.

India’s Sensex closed 0.5% lower at 59,183.25. New Zealand and Singapore declined while Indonesia advanced.

Oil prices tumbled on hopes of weak demand after rising above $130 a barrel last month on worries about supply disruptions from the world’s second-largest exporter Russia.

ACM Research, a supplier of equipment to the semiconductor industry that operates in Shanghai, declined 6.1% on Friday, saying the ban would have a significant impact on its revenue.

In energy markets, benchmark US crude fell $2.32 to $95.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.23 to $98.26 on Friday. Brent crude, which is used as a price base for international oils, fell $2.22 to $100.56 a barrel in London. It rose by $2.20 to $102.78 a barrel in the previous session.

The dollar rose to 125.33 yen from Friday’s 124.37 yen. The euro remained unchanged at $1.0906.

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