Shares were lower in Europe on Tuesday after a mixed session in Asia following a reprieve on Wall Street from selling pressure driven by worries over inflation and interest rates.
U.S. futures declined and oil prices advanced. Benchmarks rose in Tokyo, Seoul and Shanghai but fell in London, Paris and Frankfurt.
Investors are jittery as analysts raise forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there to tame inflation that has failed to fall as much as expected.
Economies around the world have remained more resilient than feared, with China loosening its business-damaging anti-COVID restrictions and Europe avoiding a worst-case energy crisis.
“As we move into `Turnaround Tuesday,’ investors are debating whether January’s inflation reflation was just another temporary bump in the road as the economy adjusts to a post-pandemic world,” Stephen Innes of SPI Asset Management said in a report. “The post-pandemic era continues to deliver unusual macroeconomic patterns.”
Germany’s DAX lost 0.5% to 15,296.37 and the CAC 40 in Paris dropped 0.6% to 7,255.12. Britain’s FTSE 100 lost 0.5% to 7,894.13. The futures for the S&P 500 and the Dow Jones Industrial Average were 0.3% lower.
In Asian trading, Tokyo’s Nikkei 225 index added 0.1% to 27,445.56 and the Kospi in Seoul advanced 0.4% to 2,412.85.
Hong Kong’s Hang Seng shed 0.8% to 19,785.94, while the Shanghai Composite index surged 0.7% to 3,279.61. Australia’s S&P/ASX 200 rose 0.5% to 7,258.40.
Shares in Mumbai fell 0.6% while Bangkok’s SET index slipped 0.4%.
Stocks have struggled in February after a strong start to the year. Robust economic data help calm fears that a recession may be imminent given the dampening impact of more costly borrowing on spending by consumers and businesses.
But they likely mean a longer spell of higher interest rates. The heightened expectations for rates have been most evident in the bond market, where yields have shot higher in recent weeks.
Earlier, analysts thought the Fed might soon ease back. Now the expectation is that it might raise rates above 5.25%. The Fed’s key overnight rate is now in a range of 4.50% to 4.75%, up from virtually zero at the start of last year.
On Monday, the S&P 500 rose 0.3% and the Dow industrials gained 0.2%. The Nasdaq composite climbed 0.6%.
Even with the worries about rates going higher than expected, the S&P 500 is still holding onto a gain of 3.7% for the year so far, and shoppers are still continuing to spend at stores. Both can add upward pressure on inflation.
Most companies have already reported their results for the last three months of 2022. Among the couple dozen companies in the S&P 500 still scheduled to report this week are Advance Auto Parts, Kroger and Target.
Overall, this earnings reporting season has been lacklustre. Companies in the S&P 500 are on track to report their first drop in earnings per share from a year earlier since the summer of 2020, according to FactSet.
In other trading Tuesday, U.S. benchmark crude oil gained 65 cents to $76.33 per barrel in electronic trading on the New York Mercantile Exchange.
Brent crude, the pricing basis for international trading, picked up 62 cents to $82.66 per barrel.
The U.S. dollar rose to 136.77 Japanese yen from 136.20 yen. The euro was unchanged at $1.0609.