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Wall Street stocks fluctuated at the open on Wednesday, as investors digested hotter than expected US retail sales data and prepared for minutes from the Federal Reserve’s last meeting, hoping for cues on the future path for US interest rates.
The benchmark S&P 500 rose 0.1 per cent in a small rebound from the previous session, while the tech-focused Nasdaq Composite gave up 0.4 per cent at the New York opening bell.
European markets also declined as global sentiment was soured by further evidence of a slowdown in China’s economy as it struggles to recover from its longstanding Covid-19 restrictions.
Europe’s region-wide Stoxx Europe 600 fell 0.3 per cent, while Germany’s Dax was off 0.1 per cent and France’s Cac 40 shed 0.2 per cent.
The declines came a day after blue-chip stocks in the US and Europe hit a five-week low, as stronger than expected data on US retail purchases raised concerns over sticky price pressures, boosting bets that the Fed would keep interest rates higher for longer.
Shares of US retailer Target leapt almost 5 per cent on Wednesday after the company said it had surpassed Wall Street estimates for profit in the second quarter. The announcement followed strong results from Home Depot a day earlier, adding to signs of resilient consumer spending.
“Given the resilience of the US economy, especially the consumer, [ . . . ] the discussion of whether enough has been done to tackle inflation may gain more traction”, said Padhraic Garvey, Americas regional head of research at ING.
Attention turned to the minutes from the Fed’s latest policy meeting, coming out later in the day, as investors hoped to gain more insight into the central bank’s future rate decisions.
Fed policymakers took the benchmark federal funds rate to a 22-year high at their last meeting in July, noting that the prospect of future tightening would depend on economic data.
While the majority of market participants believe that the Fed’s historic tightening campaign is drawing to a close, there is less consensus on how long it will take before interest rates start to go down.
Meanwhile, markets in Asia were overshadowed by another gloomy data point from China, which signalled that new home prices declined 2.5 per cent month on month in July, following a 2.2 per cent fall in the previous month.
Hong Kong’s Hang Seng index fell 1.4 per cent and China’s benchmark CSI 300 dropped 0.7 per cent, while South Korea’s Kospi shed 1.5 per cent and Japan’s Topix lost 1.3 per cent.
China’s once-dominant property sector has battled with flagging demand as the economy struggled to rebound after three years of severe pandemic restrictions, driving large property developers into a debt crisis.
Declines in the property sector come at a time of heightened anxiety over China’s economic recovery after a string of data releases in preceding weeks signalled the country was slipping into deflation, while its consumer and business activity fizzled.
In an unexpected policy move a day earlier, the People’s Bank of China lowered its one-year, medium-term lending facility rate, which affects loans to financial institutions, in an effort to shore up growth.
In the UK, sterling edged 0.2 per cent higher against the dollar, trading at $1.2727, after fresh data showed that the annual rate of UK inflation fell to 6.8 per cent in July, down from 7.9 per cent in June, while the core figure remained unchanged.
London’s FTSE 100 fell 0.7 per cent, leading declines in Europe, as investors struggled to assess whether the data was enough to convince the Bank of England to ease its aggressive monetary tightening campaign anytime soon.
