Global Shares Mixed As Investors Watch Fed Moves, Inflation

Global shares were mixed in muted trading Tuesday as investors tried to digest a slew of economic data and awaited moves by the US Federal Reserve. France's CAC 40 fell 0.1 per cent in early trading to 7,363.24. Germany's DAX added nearly 0.1 per cent to 15,659.63. Britain's FTSE 100 edged up less than 0.1 per cent to 7,931.95. US shares were set to drift higher with Dow futures up nearly 0.1 per cent at 33,470.00. S&P 500 futures rose 0.1 per cent to 4,057.75.

Japan's benchmark Nikkei 225 rose 0.3 per cent to finish at 28,309.16. Australia's S&P/ASX 200 gained 0.5 per cent to 7,364.70. South Korea's Kospi added less than 0.1 per cent to 2,463.35. Hong Kong's Hang Seng lost earlier gains to finish down 0.3 per cent at 20,534.48, while the Shanghai Composite slipped 1.1 per cent to 3,285.10. Oil prices and currencies were little changed.

The Reserve Bank of Australia decided to raise its key rate, cash rate target, by 0.25 of a percentage point to 3.6 per cent. It said that although global inflation remains high, inflation in Australia is starting to subside. The hike was expected. “Asian equities were flat on Tuesday as traders weighed the impact of economic data and awaited key events that could impact equity markets in the coming days,” said Anderson Alves at ActivTrades.

The stock market has found some footing over the last week after a swift rise at the start of the year gave way to a sharp tumble. Driving the movements are high inflation and expectations of what the Federal Reserve will do about it. Early in the year, stocks rallied and bond yields eased as hopes rose that cooling inflation would get the Fed to take it easier in its hikes in interest rates. Then, stronger-than-expected reports on the economy raised worries that inflation was not cooling as smoothly as hoped.

While that calmed worries that a recession is looming, it also forced Wall Street to raise its forecasts for how high the Fed will take interest rates. Higher rates can drive down inflation, but also hurt prices for stocks and other investments and can create a recession in the future.

Bigger action may be ahead later this week, with several potentially market-moving events on the calendar. Fed Chair Jerome Powell will testify before Congress for two days beginning on Tuesday. Other Fed officials' comments recently have led to big swings in markets, as traders try to get ahead of the next moves by the Fed. On Friday, the government will release its latest monthly jobs report. If the reading is stronger than expected, particularly if it shows a big gain in wages, it could shake Wall Street and force it to raise rate expectations even higher.

The Fed has been trying to cool growth in wages to remove pressure on inflation, which remains far above its 2 per cent target, and blowout figures could cause it to get more aggressive about rates. The Fed's next move on rates will arrive later this month. Besides Friday's jobs report, upcoming releases on inflation across the economy will likely also carry a lot of weight on the decision.

The Fed has pulled its key overnight rate to a range of 4.50 per cent to 4.75 per cent, up from virtually zero at the start of last year, in its fastest set of hikes in decades. Last month, it dialled down the size of its increases and highlighted progress being made in the battle to get inflation lower.

But that was before last month's hotter-than-expected data on inflation and other measures of the economy. Wall Street now is bracing for at least three more hikes and the possibility the Fed could also ratchet the size of the increases back up.

In energy trading, benchmark US crude fell 2 cents to USD 80.44 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost 1 cent to USD 86.17 a barrel. In currency trading, the US dollar declined to 135.81 yen from 135.93 yen. The euro cost USD 1.0676, down from USD 1.0685.