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Tuesday November 29th, 2022 3:40PM

US markets subdued ahead of Fed meeting

By The Associated Press
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U.S. futures veered lower Tuesday ahead of what is expected to be another substantial interest rate hike from the Federal Reserve this week.

Futures for the Dow Jones industrials slipped 0.4% while futures for the S&P 500 fell 0.5%.

Markets have been jittery over whether the Fed’s plan to cool the hottest U.S. inflation in four decades may go too far and cause the U.S. economy to shrink.

Federal Reserve Chair Jerome Powell bluntly warned in a speech last month that the Fed’s drive to curb inflation by aggressively raising interest rates would “bring some pain.” On Wednesday, Americans may get a better sense of how much pain could be in store.

The Fed is expected to raise its key short-term rate by a substantial three-quarters of a point for the third time this week. Another hike that large would lift its benchmark rate — which affects many consumer and business loans — to a range of 3% to 3.25%, the highest level in 14 years, and up from zero at the start of the year.

The Fed's two-day meeting starts Tuesday.

The U.S. is not isolated in it's campaign to slow a red-hot economy through rate hikes.

Sweden’s central bank on Tuesday raised its key interest rate by a full percentage point to 1.75% catching almost everyone off guard as it scrambles to bring down inflation that was measured at 9% in August. The country's central bank, the Riksbanken, said the policy would be in place for six months. Norway’s central bank raised its key policy interest rate by half a percentage point last month.

Consumer inflation in Japan jumped in August to 3%, its highest level since November 1991 but well below the 8% plus readings in the U.S. and Europe. The Bank of Japan is set to have a two-day monetary policy meeting later this week, although analysts expect the central bank to stick to its easy monetary policy.

Min Joo Kang, senior economist, South Korea and Japan, at ING Economics noted inflation remained relatively low in Japan, with energy prices rising, for instance, but not as much as in the U.S. or some parts of Europe. Housing prices haven’t risen and household income have remained stagnant.

Rate decisions from Norway, Switzerland and the Bank of England are next.

Japan’s benchmark Nikkei 225 added 0.4% to finish at 27,688.42. Australia’s S&P/ASX 200 jumped 1.3% to 6,806.40. South Korea’s Kospi added 0.5% to 2,367.85. In China, where the loan prime rate was kept unchanged, the Shanghai Composite added 0.2% to 3,122.41. Hong Kong’s Hang Seng added 1.2% to 18,781.42.

In Europe, France’s CAC 40 slipped 0.7% in midday trading, while Germany’s DAX slid 0.9%. Britain’s FTSE 100 inched back 0.1%.

Investors will get another update on the housing sector Wednesday when the National Association of Realtors releases August figures for sales of previously occupied homes.

Average long-term U.S. mortgage rates climbed above 6% last week for the first time since the housing crash of 2008. Rising prices for homes have already put many out of the market and rising interest rates are making that worse.

Adding pressure to U.S. markets are major companies that are warning of worsening economic conditions. The U.S. market endured its worst week in three months last week after a surprisingly hot report on consumer prices, and also a grim outlook from FedEx.

Ford shares are own almost 5% Tuesday after it slashed its third-quarter outlook late Monday because a parts shortage will leave it with as many as 45,000 vehicles unfinished on its lots when the quarter ends Sept. 30. Most of those are SUVs and popular truck models, some of Ford’s biggest money makers.

Ford now expects its third-quarter earnings before interest and taxes to be between $1.4 billion and $1.7 billion, compared to $3.7 billion in the second quarter.

In energy trading, benchmark U.S. crude gained 7 cents to $85.80 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, picked up 8 cents to $92.08 a barrel.

In currency trading, the U.S. dollar edged up to 143.57 Japanese yen from 143.20 yen. The euro fell to 99.96 cents from $1.002.

——

Kageyama reported from Tokyo, Ott reported from Washington.

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