US futures decline ahead of Fed rates decision, earnings

Wall Street futures pointed modestly lower and world stock markets were mixed on Monday ahead of what is expected to be a Federal Reserve decision this week to raise interest rates again.

Futures for the Dow Jones industrials and futures for the S&P 500 each slipped 0.3%.

The Fed is widely expected at this week’s meeting to announce another rate hike of 0.75 percentage points, three times its usual margin. Investors are looking for signs officials are satisfied that earlier increases imposed to cool inflation that is near a four-decade high are working and future increases can be smaller.

Investors worry that rate hikes by the Fed and other central banks to cool inflation might tip the global economy into recession. The U.S. central bank has raised its benchmark lending rate to a range of 3% to 3.25% from close to zero in March.

“The tone from Fed Chair Jerome Powell will be important” after this week’s meeting, said Yeap Jun Rong of IG in a report. Investors are looking for “increased concerns on economic conditions” instead of the “current head-on resolve to tame inflation.”

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Core inflation, which removes volatile food and energy prices to show the underlying trend, accelerated to 5.1% from August’s 4.9%. Powell and other Fed officials have said they are ready to keep interest rates elevated until they are sure inflation is extinguished.

The government reported last week that the U.S. economy returned to growth in the third quarter after contracting in the first half of 2022.

Stronger exports and consumer spending, backed by a healthy job market, helped the economy grow at a better-than-expected 2.6% annual rate from July through September, according to the Commerce Department.

Wall Street ended last week higher after Apple and other big companies reported strong profits and a closely watched measure of inflation accelerated in September. Among the companies reporting earnings this week are Pfizer, Uber, CVS Health and Starbucks.

The European Union’s statistics agency, Eurostat, reported Monday that inflation hit a new record in the 19 countries that use the euro currency, fueled by out-of-control prices for natural gas and electricity due to Russia’s war in Ukraine. According to Eurostat, annual inflation reached 10.7% in October.

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Economic growth also slowed ahead of what economists fear is a looming recession, largely as a result of those higher prices sapping Europeans’ ability to spend.

In European trading at midday, Germany’s DAX gained 0.3%, Britain’s FTSE 100 picked up 0.2% and the CAC 40 in Paris lost 0.2%.

In Asian trading, the Nikkei 225 in Tokyo gained 1.8% to 27,587.46, as the government reported that retail sales rose in September, though industrial production weakened.

The Shanghai Composite Index shed 0.8% to 2,893.48 after a manufacturing survey showed a weakening in production and demand. Hong Kong’s Hang Seng dropped 1.2% to 14,687.02.

The Kospi in Seoul added 1.1% to 2,293.61 and Sydney’s S&P-ASX 200 gained 1.2% to 6,863.50.

In energy markets Monday, benchmark U.S. crude lost $1.54 to $86.36 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.18 to $87.90 on Friday. Brent crude, used to price international oils, retreated $1.46 to $92.31 per barrel in London. It declined $1.19 on Friday to $95.77.

The dollar rose to 148.64 yen from Friday’s 147.53 yen. The euro edged down to 99.29 cents from 99.55 cents.

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McDonald reported from Beijing; Ott reported from Washington.

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