World stocks slip as Fed rate hike signal spooks investors
HONG KONG - World stock markets sank Thursday after the Fed surprised investors by signaling that an interest rate hike is in the cards if economic conditions keep improving.
European stocks dropped sharply in early trading, with Germany's DAX shedding 1.6 percent to 9,788.29 and France's CAC 40 falling 0.9 percent to 4,278.98. Britain's FTSE 100 slid 1.5 percent to 6,075.68.
U.S. stocks were poised to open slightly lower, with S&P 500 futures down 0.1 percent and Dow futures virtually unchanged.
According to minutes of the Fed's latest meeting, U.S. central bankers feel it would be time to raise rates at the next Fed meeting on June 14-15 if hiring and economic growth continue to strengthen and inflation keeps rising. The comments took investors by surprise and raise the prospect that some of the loose monetary policy that has supported stock markets globally will be dialed back. Investors are hoping for more insight from Fed officials including Vice Chairman Stanley Fischer and William Dudley, president of the Fed's New York regional bank, who are scheduled to give speeches later Thursday.
"Markets have looked for government stimulus as a reason for investing rather than good company economics or fundamentals. Obviously therefore if there's less chance of stimulus people are left wondering what to do," said Andrew Sullivan, sales trader at Haitong Securities. "Yes, it will be a shock to people, and I'm sure there will be a knee-jerk reaction but the reality is we are nowhere near normal rates."
The benchmark Nikkei 225 index in Tokyo ended flat at 16,646.66, while South Korea's Kospi lost 0.5 percent to 1,946.78. Hong Kong's Hang Seng shed 0.7 percent to 19,694.33, while the Shanghai Composite Index in mainland China was practically unchanged at 2,806.91. Australia's S&P/ASX fell 0.6 percent to 5,323.30. Benchmarks in Taiwan, New Zealand and Southeast Asia also lost ground.
Benchmark U.S. crude oil extended its losses, falling 89 cents, or 1.9 percent, to $47.30 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 12 cents, or 0.2 percent, to settle at $48.19 a barrel on Thursday. Brent crude, used to price international oils, dropped $1.11, or 2.3 percent, to $47.82 a barrel in London.
The dollar slipped to 110.00 yen from 110.10 yen in late trading Thursday. The euro fell to $1.1219 from $1.1225.