Global stocks shrink ahead of US Fed meet, inflation data

Beijing: Global stock markets and Wall Street futures sank on Monday after the Federal Reserve indicated it might raise interest rates more aggressively to cool US inflation and President Emmanuel Macron emerged from the first round of France's election facing a challenge from the far right. London and Frankfurt opened lower. Shanghai, Tokyo and Hong Kong retreated. Oil fell more than $2 per barrel on concern global economic growth might weaken. Investors are uneasy about higher interest rates, Russia's war on Ukraine and China's effort to contain corona virus outbreaks. Fed officials indicated in notes from last month's meeting they were considering raising the US benchmark rate by double the normal amount at upcoming meetings. They also indicated they may shrink the Fed's bond holdings, which might push up commercial borrowing rates.

Investors see "increasing evidence the Federal Reserve will take a more committed approach" to fighting inflation, said Stephen Innes of SPI Asset Management in a report. In early trading, the FTSE 100 in London fell 0.3 per cent to 7,648.81 and Frankfurt's DAX shed 0.5 per cent to 14,220.99. The CAC 40 in Paris advanced 0.7 per cent to 6,593.24 after Macron said his battle with challenger Marine Le Pen of the National Rally for the April 24 second round of voting will be a hard fight. The two were finalists in the last presidential election five years ago.

"Markets are looking to a volatile two weeks before the final result is known," Charlotte de Montpellier and Antoine Bouvet of ING said in a report. On Wall Street, the future for the benchmark S&P 500 index was off 0.4 per cent and that for the Dow Jones Industrial Average was down 0.1 per cent. On Friday, the S&P 500 lost 0.3 per cent and the Dow rose 0.4 per cent. The Nasdaq composite fell 1.3 per cent. Higher interest rates usually depress economic activity and make safer assets such as bonds more attractive while making stocks look riskier and more expensive. Some worry the Fed, after being accused of reacting too late to rising inflation, might push the brakes too hard and tip the world's biggest economy into recession.