Global shares regain footing after U.S. rate hike jitters fade

TOKYO - Global shares regained a firmer footing Thursday after several days of volatile trading linked to anxiety over a probable rate hike in the U.S.

Britain's FTSE 100 gained 0.7 percent to 6,769.22 while Germany's DAX edged 0.2 percent lower to 11,782.76. France's CAC 40 was little changed at 4,996.08 and most other European benchmarks were higher. Wall Street looked set for a solid start, with Dow futures up 0.3 percent and S&P 500 futures up 0.2 percent.

Investors are watching for clues from a U.S. Federal Reserve meeting next week about the possible timing of an interest rate hike. The Fed was expected to raise interest rates later this year but strong jobs data has raised expectations for quicker action. The Fed's key rate has been near zero since the global financial crisis. That has been a boon for stock markets so the possibility rates will rise in coming months is prompting investors to shift away from shares.

"Stability has returned to most Asian developed markets, although the S&P 500 is looking the most vulnerable among the major markets," said IG's chief market strategist Chris Weston in a commentary. "The underperformance of the S&P 500 is building by the day, especially against Eurostoxx 50, China CSI 300 and also the ASX 200," he said. "In the equity space, the trade continues to be favoring markets where the underlying central bank is undergoing radical balance sheet expansion, or cutting interest rates."

Japan's Nikkei 225 rose 1.4 percent to 18,991.11 and Australia's S&P/ASX 200 jumped 1 percent to 5,850.20. Hong Kong's Hang Seng added 0.3 percent to 23,797.96 and the Shanghai Composite Index gained 1.8 percent to 3,349.32. South Korea's Kospi slipped 0.5 percent to 1,970.52, shedding gains as worries about the economic outlook offset an unexpected rate cut by the central bank.

While the Fed is poised to raise rates, the European Central Bank is trying to lower them and the Bank of Japan is also engaged in massive monetary easing. The divergent policies are hammering the euro and sending the dollar higher. The euro was trading at $1.0614 versus $1.0547 in the previous session. The dollar slipped to 121.12 yen from 121.47 yen but remains at its highest levels against the Japanese currency since 2007. Asian currencies such as South Korea's won and Malaysia's ringgit have also been weakening, which markets may eventually see as a positive since cheaper currencies will boost the region's exports.

South Korea's central bank cut its policy interest rate by a quarter percentage point to a record low of 1.75 percent, saying growth and inflation will likely undershoot its forecasts. Investors appeared to shrug off a report Thursday showing deterioration in Japanese business sentiment. Continued signs of weakness in the economy have raised hopes for additional stimulus from the central bank, which is already injecting trillions of yen (tens of billions of dollars) a month into the economy.

Benchmark U.S. crude oil was up 32 cents to $48.49 a barrel in electronic trading on the New York Mercantile Exchange. It fell 12 cents on Wednesday to $48.17 a barrel. Brent crude, a benchmark for international oils used by many U.S. refineries, rose 36 cents to $58.24 a barrel in London.