TOKYO -- Global shares retreated Friday, tracking losses on Wall Street after Federal Reserve Chair Jerome Powell indicated increases in interest rates must be faster to fight inflation.
Most major indexes declined, though Shanghai edged higher after authorities there promised to ease anti-virus controls on truck drivers that are hampering food supplies and trade. Oil prices fell more than $2 a barrel.
Investors are watching for developments in Ukraine and a presidential runoff election in France this weekend.
France's CAC 40 slipped 1.2% in early trading to 6,632.23, while Germany's DAX fell 1.2% to 14,334.63. Britain's FTSE 100 shed 0.5% to 7,590.47. The futures for the Dow industrials and S&P 500 slipped 0.2%.
In Asian trading, Japan’s benchmark Nikkei 225 dipped 1.6% to finish at 27,105.26. Australia’s S&P/ASX 200 dropped 1.6% to 7,473.30. South Korea’s Kospi shed 0.9% to 2,704.71. Hong Kong’s Hang Seng slipped 0.2% to 20,638.52, while the Shanghai Composite recouped earlier losses to edge up 0.2% to 3,086.92.
Japanese Finance Minister Shunichi Suzuki made comments seen as a slightly more forceful pushback against “sudden movements" in exchange rates after meeting with Treasury Secretary Janet Yellen on the sidelines of G-20 finance ministers’ meetings.
The U.S. dollar rose to 128.45 Japanese yen from 128.36 yen. The euro cost $1.0801, inching down from $1.0840.
An intervention, particularly from the U.S., may be coming, said Stephen Innes at SPI Asset Management.
But the main cause of the dollar’s surge against the yen and other currencies — a growing gap between interest rates in Japan and some other Asian countries and rising U.S. interest rates — is unlikely to abate.
"The BOJ is likely to remain steadfast in its approach to ultra-dovish monetary policy relative to its peers that implicitly welcomes yen depreciation,” he said, referring to Japan's central bank.
In a panel discussion held by the International Monetary Fund, Fed Chair Jerome Powell said the Fed must move faster than it has previously to tackle high inflation, which suggests sharp interest rate increases are likely in coming months.
The S&P 500 reversed direction after that, losing 1.5%, while the Dow Jones Industrial Average fell 1% and the Nasdaq slid 2.1%. The Russell 2000 small caps index gave up 2.3%.
“Under the weight of war, global energy and food risk, equity markets may well begin to buckle, unfortunately in a rather spectacular manner. We have been saying for some time that the only way to protect your investment portfolio is to be cautious on equities and buying gold, oil and the U.S. dollar,” said Clifford Bennett, chief economist at ACY Securities.
The Fed has already announced a quarter-percentage point rate hike and Wall Street expects a half-percentage rate hike at its next meeting in two weeks. Other central banks have also moved to raise interest rates to try and temper the impact of rising prices on businesses and consumers.
Powell suggested that “there’s something in the idea of front-loading” aggressive rate hikes as the Fed grapples with inflation that has reached a four-decade high.
That suggests a half-point rate increase could be on the table when Fed officials hold their next interest rate and economic policy meetings May 3-4, Powell said. In the past, the Fed has typically raised its benchmark short-term rate by more modest quarter-point increments.
In France, President Emmanuel Macron appeared to have widened his lead over far-right challenger Marine Le Pen, easing some worries about potential major changes in Europe. Macron has received support from the center-left leaders of Germany, Spain and Portugal, who have urged French voters to choose him.
Bond yields have been gaining ground as investors prepare for higher interest rates. The yield on the 10-year Treasury rose significantly to 2.95% Friday from 2.92% late Thursday, hovering near its highest levels since late 2018.
Benchmark U.S. crude fell $2.16 to $101.63 a barrel. It rose 1.6% on Thursday and is up roughly 40% for the year. That has made gasoline more expensive, which cuts deeper into consumers' wallets. Brent crude, the international standard, lost $2.12 to $105.84 a barrel.
