NEW YORK (AP) — U.S. markets were on track to open lower on Wednesday, after comments from a Federal Reserve official fueled expectations for more aggressive rate hikes and the White House announced to new sanctions against Russia.
On Wall Street, futures for the S&P 500 fell 0.9% and the same for the Dow Jones Industrial Average fell 0.7%.
Shares in London and Frankfurt were down sharply by midday. Tokyo and Hong Kong fell, while Shanghai was little changed. Oil prices rose more than $1 a barrel, nearly reversing Tuesday’s losses.
Wall Street’s S&P 500 index fell 1.3% on Tuesday after Fed Governor Lael Brainard said that inflation control, which is at its highest level in four decades, is ” of paramount importance”. Brainard said the Fed is expected to continue raising rates after its March hike, its first in four years, and may decide at its May meeting to reduce bond holdings “at a rapid pace.”
Wall Street is on the lookout for clues as to the magnitude of the rise in interest rates. On Wednesday, the Fed is due to release the minutes of its March interest rate meeting.
The White House has said Western governments will ban further investment in Russia following evidence that its soldiers deliberately killed civilians in Ukraine. The US Treasury has said President Vladimir Putin’s government will be prevented from paying the dollar debts of US financial institutions, potentially increasing the risk of default.
European governments have resisted calls to boycott Russian gas, Putin’s main export source, because of the possible impact on their economies.
“It’s hard to be particularly optimistic” about the war, “but we live in hope,” Oanda’s Craig Erlam said in a statement. “And it seems investors are too” despite inflation, rate hikes and high commodity prices.
At noon, the DAX in Frankfurt and the CAC 40 in Paris both fell by 2%. London’s FTSE slipped 0.3%.
In Asian trading, the Hang Seng in Hong Kong fell 1.9% to 22,080.52 and the Nikkei 225 in Tokyo fell 1.6% to 27,350.30. The Shanghai Composite Index ended less than 0.1% at 3,283.43 after spending most of the day in negative territory.
Seoul’s Kospi fell 0.9% to 2,735.30 and Sydney’s S&P-ASX 200 lost 0.5% to 7,490.10.
India’s Sensex fell 0.9% to 59,629.07. Markets in New Zealand and Southeast Asia also fell.
Traders are pricing a near 78% chance that the Fed will raise its key rate by half a percentage point at its next meeting in May. That would be double the usual variation band and a step the Fed hasn’t taken since 2000.
Higher interest rates tend to hurt stocks considered more expensive, which puts a premium on big tech and other high-growth stocks. On Wall Street, Apple and Tesla were among the largest market weights on Tuesday.
Benchmark U.S. oil rose $1.07 to $103.03 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell from $1.32 on Tuesday to $101.96. Brent crude, the price basis for international oil trade, added 78 cents to $107.42 a barrel in London. It was down 89 cents the previous session at $106.64.
The dollar rose to 123.90 Japanese yen from 123.61 yen on Tuesday. The euro fell from $1.0905 to $1.0918.
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