World stocks retreat as inflation augurs Fed rate hikes

Surging coronavirus cases have been raising uncertainty about the pace of recovery from the pandemic.

Britain and Germany have endured severe waves of the highly contagious omicron variant of coronavirus. France is at the epicenter of Europe’s current fight against COVID-19, with new infections topping 360,000 a day in recent days.

Germany’s DAX fell 0.2% to 15,973.58 while the CAC 40 in Paris sank 0.6% to 7,196.23. In Britain, the FTSE 100 lost 0.3% to 7,533.13. On Wall Street, the futures for the S&P 500 and for the Dow industrials were down less than 0.1%.

Tokyo’s Nikkei 225 index dropped 1% to 28,489.13, while the Shanghai Composite shed 1.2% to 3,555.26. In Seoul, the Kospi lost 0.4% to 2,962.09.

The Hang Seng in Hong Kong edged 0.1% higher, to 24,429.77 and the S&P/ASX 200 in Australia added 0.5% to 7,474.40. India’s Sensex edged 0.1% lower.

Taiwan’s benchmark rose 0.3% after TSMC, the world’s largest contract manufacturer of computer chips, reported a record quarterly profit of just over $6 billion.

The yield on the 10-year Treasury was steady at 1.74%.

Apart from the direct impact from big coronavirus outbreaks on normal business activity, spill over effects on manufacturing and shipping could further hinder a rebound from the past two years of disruptions.

“So far, the market’s reaction to the omicron wave has been moderate, but it is worth paying attention to worries about further impacts to global supply chains which could trigger risk-off trade,” Anderson Alves of ActivTtrades said in a report.

On Wednesday, the S&P 500 rose 0.3%; the Dow Jones Industrial Average eked out a 0.1% gain and the Nasdaq composite rose 0.2%. The Russell 2000 index fell 0.8%.

Investors were focused on a report from the Labor Department, which showed consumer prices jumped 7% last month. That’s the fastest year-over-year pace in the consumer price index in nearly four decades. The sharp increase, which was in line with economists’ forecasts, came a day after Fed Chair Jerome Powell told Congress that the central bank stands ready to raise rates to fight inflation.

Businesses in many industries have been passing higher costs off to consumers, but have been warning that they will still feel a financial impact because of higher prices and supply chain problems.

Wall Street will get another update on rising inflation on Thursday, when the Labor Department releases December results from an index based on U.S. wholesale prices. It shows how inflation is affecting costs for businesses.

Investors also are closely watching the latest round of earnings to see how companies are dealing with inflation.

Delta Air Lines reports its results on Thursday. Citigroup, JPMorgan Chase and Wells Fargo report results on Friday.

In other trading Thursday, U.S. benchmark crude oil lost 19 cents to $82.45 per barrel in electronic trading on the New York Mercantile Exchange. It gained $1.42 to $82.64 per barrel on Wednesday.

Brent crude, the basis for pricing international oils, lost 15 cents to $84.52 per barrel.

The U.S. dollar fell to 114.58 Japanese yen from 114.64 yen. The euro rose to $1.1469 from $1.1444.