BEIJING (AP) — Asian stock markets fell Friday while Europe opened higher after a Federal Reserve official suggested U.S. interest rates might have to be raised higher than expected to cool inflation.
London and Frankfurt advanced while Shanghai, Hong Kong and Tokyo declined. Wall Street futures were lower. Oil prices gained.
Wall Street's benchmark S&P 500 index lost 0.3% on Thursday after a Fed official indicated the U.S. central bank might need to raise its key lending rate as high as almost double its already elevated level to rein in price increases. Officials warned previously that rates might stay high for an extended period, but traders hoped signs of slowing economic activity might cause the Fed to back off those plans.
Traders worry unusually large rate hikes this year by the Fed and central banks in Europe and Asia to stop inflation that is at multi-decade highs might tip the global economy into recession.
“Fed hawks continued to circle the wagons, repeatedly emphasizing their fight against inflation is far from done,” said Stephen Innes of SPI Asset Management.
In early trading, the FTSE 100 in London gained 0.2% to 7,360.01. The DAX in Frankfurt rose 0.4% to 14,320.39 and the CAC 40 in Paris gained 0.5% to 6,608.04.
On Wall Street, the S&P 500 future was up 0.2%. That for the Dow Jones Industrial Average was 0.3% higher.
On Thursday, the Dow slipped less than 0.1%. The Nasdaq composite closed 0.3% lower.
The major U.S. indexes were all headed for weekly losses.
The president of the Federal Reserve Bank of St. Louis reaffirmed the Fed’s position. James Bullard suggested the Fed’s key short-term lending rate may have to rise to between 5% and 7%.
That would require additional sharp increases in the Fed’s benchmark rate. It stands at 3.75% to 4%, up from close to zero in March.
Traders expect the Fed to raise its benchmark lending rate again at its December meeting, but by half a percentage point after four straight 0.75 percentage point increases, three times its usual margin.
Bullard's presentation follows reports showing inflation is starting to ease but still is hot as consumers keep spending amid a very strong jobs market.
“The Fed may need to continue hiking beyond February,” said Edward Moya of Oanda in a report.
In Asia, the Shanghai Composite Index lost 0.6% to 3,097.24 and the Nikkei 225 in Tokyo sank 0.1% to 27,899.77. The Hang Seng in Hong Kong shed 0.3% to 17,992.54.
The Kospi in Seoul was less than 0.1% higher at 2,444.48. Sydney's S&P-ASX 200 added 0.2% to 7,151.80.
India's Sensex sank 0.6% to 61,348.47. New Zealand, Jakarta and Bangkok gained while Singapore declined.
Investors also worry about the impact of Russia's war on Ukraine — which has pushed up prices of oil, wheat and other commodities — and increased anti-virus controls in China.
China's “zero-COVID” approach has caused a supply crunch for some of Asia's biggest manufacturers, denting economic growth.
In energy markets, benchmark U.S. crude rose 46 cents to $82.10 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $3.95 on Thursday to $81.64. Brent crude, the price basis for international oil trading, gained 33 cents to $90.11 per barrel in London. It lost $3.08 the previous session to $89.78.
The dollar edged down to 140.07 yen from Thursday's 140.25 yen. The euro declined to $1.0348 from $1.0364.