Global stocks down after strong US jobs data fuels rate hike fears

Global stock markets declined Wednesday after strong US jobs data fuelled expectations of more interest rate hikes and Chinese manufacturing activity weakened.

London and Frankfurt opened lower. Shanghai, Tokyo and Hong Kong declined. Oil prices lost more than USD 1 per barrel.

US government data Tuesday showed there were two jobs for every unemployed person in July, giving ammunition to Federal Reserve officials who argue the economy can tolerate more rate hikes to tame inflation that is at multi-decade highs. Some investors had hoped the Fed would back off due to signs economic activity is cooling.

The jobs data supported the argument for the Fed to stick to an aggressive stance, Edward Moya of Oanda said in a report.

In early trading, the FTSE 100 in London fell 0.6 per cent to 7,319.62 and the DAX in Frankfurt shed 0.4 per cent to 12,913.41. The CAC 40 in Paris fell 0.5 per cent to 6,178.78.

On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones Industrial Average were up 0.2 per cent.

On Tuesday, the S&P 500 index fell 1.1 per cent, bringing its decline over the past five days to 5.5 per cent. The Dow dropped 1 per cent and the Nasdaq composite lost 1.1 per cent.

In Asia, the Shanghai Composite Index fell 0.8 per cent to 3,202.14 after an index of manufacturing showed activity contracted again in August.

The Hang Seng ended up less than 0.1 per cent at 19,954.39 after spending most of the day in negative territory.

The Nikkei 225 in Tokyo shed 0.4 per cent to 28,091.53 after July industrial production rose by an unexpectedly strong 1 per cent over the previous month.

The Kospi in South Korea gained 0.9 per cent to 2,472.05 after July factory output declined 1.3 per cent compared with the previous month.

Sydney's S&P-ASX 200 shed 0.2 per cent to 6,986.80. New Zealand advanced while Singapore and Indonesia declined. Indian markets were closed for a holiday.

Investors worry rate hikes by the Fed and central banks in Europe and Asia to cool inflation might derail global economic growth.

Fed Chair Jerome Powell on Friday indicated it will stick to rate hikes.

The Fed has raised rates four times this year. Two of those were by 0.75 percentage points, three times the usual margin.

Traders appear to expect another 0.75 percentage point hike in September, a half point in November and 0.25 points in December, according to Moya.

If the labor market doesn't break and the consumer remains resilient, Wall Street might start pricing in rate hikes for February and March," Moya wrote.

The US government reported Tuesday there were 11.2 million open jobs on the last day of July. That was up from 11 million in June. June's figure was also revised higher.

In energy markets, benchmark US crude fell USD 1.10 to USD 90.51 per barrel in electronic trading on the New York Mercantile Exchange. The contract plunged USD 5.37 to USD 91.64 on Tuesday. Brent crude, used to price international trading, fell USD 1.47 to USD 96.37 per barrel in London.

The dollar edged up to 138.74 yen from Tuesday's 138.67 yen. The euro declined to 99.96 cents from USD 1.0021.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)