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Global stocks decline ahead of US inflation update

BEIJING (AP) — Global stock markets fell Thursday ahead of a U.S. inflation update that will likely influence Federal Reserve plans for more interest rate hikes as investors waited to see who will control Congress after this week’s elections.

London, Shanghai, Frankfurt and Tokyo declined. U.S. futures were higher. The euro fell back below $1.

Wall Street’s benchmark S&P 500 index tumbled Wednesday as votes were counted to decide whether Republicans take control of Congress, possibly leading to changes that can unsettle markets. Investors were rattled by the crypto industry’s latest crisis of confidence and weaker profit reports from The Walt Disney Co. and some other companies.

Forecasters expect U.S. government data Thursday to show inflation eased in September but stayed near a four-decade high. That might reinforce arguments that rates have to stay elevated for an extended period to slow economic activity and extinguish inflation.

“An upside surprise today would present a challenge for officials who expect to slow the pace of rate hikes,” Rubeela Farooqi of High-Frequency Economics said in a report.

In early trading, the FTSE 100 in London was 0.1% lower at 7,285.86. The DAX in Frankfurt lost 0.1% to 13,647.47 and the CAC 40 in Paris shed 0.2% to 6,417.98.

On Wall Street, futures for the S&P 500 and the Dow Jones Industrial Average were up 0.3%.

On Wednesday, the S&P 500 lost 2.1%, erasing gains from a three-day rally leading up to Election Day.

Disney sank 13.2% for the largest loss in the S&P 500 after reporting quarterly results that fell short of analysts’ expectations.

The Dow fell 2% and the Nasdaq composite, dominated by tech companies, tumbled 2.5%.

Facebook parent Meta Platforms rose 5.2% after saying it will cut costs by laying off 11,000 employees, or about 13% of its workforce. It is down nearly 70% for the year.

In Asia, Hong Kong’s Hang Seng index fell 1.7% to 16,081.04 and the Nikkei 225 in Tokyo sank 1% to 27,446.10. The Shanghai Composite Index lost 0.4% to 3,036.13.

The Kospi in Seoul declined 0.9% to 2,407.70 and Sydney’s S&P-ASX 200 was off 0.5% at 6,964.00.

India’s Sensex shed 1% to 60,447.97. New Zealand, Bangkok and Jakarta declined while Singapore and Malaysia gained.

The Philippines’ market benchmark lost 0.5% after the government reported the economy grew by 7.6% in the three months ending in September.

Investors worry rate hikes this year by the Fed and central banks in Europe and Asia to cool inflation might tip the global economy into recession. Traders hope indicators that show U.S. housing sales and other activity weakening might prompt the Fed to back off plans for more rate hikes.

In the United States, Republicans were within nine seats of the 218 needed to control the House of Representatives as votes still were being counted in some states. Control of the Senate depended on races in Nevada and Arizona that hadn’t been decided.

The outcome will determine how the next two years of President Joe Biden’s term play out. Republicans are likely to launch a spate of investigations into Biden, his family and his administration if they take power. A GOP takeover of the Senate would hobble the president’s ability to appoint judges.

Still, the election “impact on markets is pretty irrelevant beyond the very near term,” said David Chao of Invesco in a report. “Investors should be worried about inflation, since that will help to dictate the Fed’s future path.”

Forecasters expect Thursday’s data to show inflation decelerated to 7.9% in September from the previous month’s 8.3%. However, prices were expected to rise 0.6% compared with August, accelerating from July’s 0.1% increase.

Core inflation, which strips out volatile food and energy prices to show a clearer trend, is expected to accelerate to 6.5% from August’s 6.3%. That suggests costs of rent, medical services, autos and other goods and services still are rising in response to strong demand.

Traders expect the Fed to raise rates again next month but by a smaller margin of one-half percentage point after a series of 0.75 percentage-point increases. The Fed’s key lending rate is a range of 3.75% to 4%, up from close to zero in March. A growing number of investors expect it to exceed 5% next year.

Also Wednesday, cryptocurrencies fell amid worries about the industry’s financial strength after a big player, Binance, called off a deal to buy troubled rival FTX. That at least temporarily ended hopes for a bailout after FTX users scrambled to pull out their money.

Bitcoin fell 14% from a day earlier to $15,900. That is down 77% from last year’s high of $69,000.

The yield on the 10-year Treasury, which helps dictate rates for mortgages and other loans, fell to 4.08% from 4.13% late Tuesday. The two-year yield, which tends to more closely track expectations for Fed action, dropped to 4.60% from 4.66%.

In energy markets, benchmark U.S. crude shed 49 cents to $85.34 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oil trading, lost 42 cents to $92.23 per barrel in London.

The dollar gained to 146.31 yen from Wednesday’s 145.56 yen. The euro declined to 99.83 cents from $1.0073.

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