TOKYO (AP) — Global markets were mostly lower and Japan’s stock index tumbled Thursday as the U.S. dollar sank against the yen after the head of the Federal Reserve suggested a cut to interest rates will come soon.
France’s CAC 40 slid 1.3% in early trading to 7,433.71. Germany’s DAX declined 1.3% to 18,275.40, while Britain’s FTSE 100 fell 0.3% to 8,347.45. The future for the S&P 500 edged 0.1% higher while that for the Dow industrials fell 0.1%.
Central bank movements remained in the spotlight after the Bank of Japan raised its benchmark rate a day earlier and the Federal Reserve kept its key rate unchanged. Economists were divided on whether the Bank of England would cut its main interest rate Thursday by a quarter-point from the current 16-year high of 5.25%, or hold off off until September.
Inflation has reached the central bank’s target of 2%, but some members of its policymaking panel have voiced concerns about persistent price pressures in the services sector, which accounts for around 80% of the British economy.
In Asian trading, the Nikkei 225 in Tokyo sank more than 1,000 points earlier in the day and ended trading down 2.5% at 38,126.33.
A stronger yen increases the purchasing power of Japanese homes and businesses but hurts the profits of exporters like Toyota by eroding the value of their overseas earnings.
Hong Kong’s Hang Seng slipped 0.2% to 17,304.96, while the Shanghai Composite lost 0.2% to 2,932.39.
Australia’s S&P/ASX 200 edged up 0.3% to 8,114.70, while South Korea’s Kospi rose 0.3% to 2,777.68.
In currency trading, the U.S. dollar fell to 149.67 Japanese yen from 149.98 yen. The euro cost $1.0815, little changed from $1.0830. The dollar had been trading at 160-yen levels several weeks ago. But that reversed course as anticipation grew for a Bank of Japan rate cut, which came Wednesday.
Toyota’s shares sank 8.5%, while Nintendo’s fell 3.4% and Sony’s lost 3.3%.
Analysts said indications from the Federal Reserve were that rate cuts were coming.
“A September cut is now priced in with certainty, and almost three cuts are priced in by the year-end,” said Robert Carnell, regional head of research Asia-Pacific at ING Economics.
On Wall Street, the S&P 500 jumped 1.6% to 5,522.30 for its best day since February. The Dow Jones Industrial Average rose 0.2% to 40,842.79 and the Nasdaq composite soared 2.6% to 17,599.40.
The widespread gains came as Treasury yields eased in the bond market after the Federal Reserve gave the clearest indication yet that it could begin lowering interest rates in September.
“We think that the time is approaching,” Powell said. “And if we do get the data that we hope we get, then a reduction in our policy rate could be on the table at the September meeting.”
After the Fed voted to keep interest rates steady on Wednesday, as was widely expected, Powell spent much of an ensuing press conference discussing the risks of both moving too early or too late with rate cuts. One could allow inflation to reaccelerate, while the other could cause unnecessary pain for the economy and ultimately throw Americans out of their jobs.
Some of Wednesday’s strongest action was in the oil market, where the price for a barrel of benchmark U.S. crude jumped about 4%. Hamas’s top political leader Ismail Haniyeh died in a predawn airstrike in the Iranian capital early Wednesday, Iran and the militant group said, blaming Israel for a shock assassination that could escalate conflict in the region and potential disrupt the flow of oil. There was no immediate comment from Israel.
Benchmark U.S. crude rose 55 cents to $78.46 a barrel. Brent crude, the international standard, added 59 cents to $81.43 a barrel.
The euro slipped to $1.0782 from $1.0825.
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