AFP

Major stock markets stumbled Wednesday, as lingering concerns over sky-high inflation offset positive earnings.

In a sign of the uphill struggle in the battle against soaring prices, UK inflation jumped back above 10 percent last month.

London’s FTSE 100 shares index steadied and the pound fell following the data — and as Britain’s under-fire Prime Minister Liz Truss faced a grilling in parliament.

Foreign exchange traders were keeping tabs also on whether the dollar would reach 150 yen, which would be a fresh high for 32 years.

Japan’s currency is being hit hard as the country’s central bank holds off from hiking interest rates, in sharp contrast to its peers the world over which are aggressively hiking borrowing costs to try and cool decades-high inflation.

Asian stock markets diverged after Wall Street ended higher for a second session running Tuesday, heartened by forecast-beating results from Goldman Sachs and Johnson & Johnson.

They came on the heels of better-than-expected reports from banking giants Citi, JP Morgan and Wells Fargo.

Traders were given an extra boost by news that Netflix gained more than two million subscribers in July-September.

“Earnings season offers investors the opportunity to focus more on the actual earnings power of corporate America, and less on the machinations of the backward-looking economic data stream,” said Art Hogan, a strategist at B. Riley.

“A better-than-feared earnings season may well be the catalyst the market needs to see a break in the steady grind lower.”

In Europe, Nestle’s sales surged in the first nine months of the year as the maker of Nespresso capsules, Purina pet food and Haagen-Dazs ice cream raised its prices in response to soaring inflation.

On commodity markets, crude oil prices rose on renewed supply worries.

They had slumped Tuesday on bets that US President Joe Biden would order the release of more barrels from the country’s emergency reserves in order to keep fuel prices subdued heading into mid-term elections.

– Key figures around 1100 GMT –

London – FTSE 100: FLAT at 6,934.52 points

Frankfurt – DAX: UP 0.1 percent at 12,776.12

Paris – CAC 40: UP 0.4 percent at 6,090.48

EURO STOXX 50: UP 0.7 percent at 3,486.43

Tokyo – Nikkei 225: UP 0.4 percent at 27,257.38 (close)

Hong Kong – Hang Seng Index: DOWN 2.4 percent at 16,511.28 (close)

Shanghai – Composite: DOWN 1.2 percent at 3,044.38 (close)

New York – Dow: UP 1.1 percent at 30,523.80 (close)

Pound/dollar: DOWN at $1.1252 from $1.1332 on Tuesday

Dollar/yen: UP at 149.59 yen from 149.21 yen

Euro/dollar: DOWN at $0.9780 from $0.9862 

Euro/pound: DOWN at 86.97 pence from 87.01 pence

Brent North Sea crude: UP 1.1 percent at $91.03 per barrel

West Texas Intermediate: UP 1.5 percent at $84.04 per barrel

Hong Kong’s leader unveiled plans to resuscitate the business hub’s fortunes on Wednesday, hoping to lure back international expertise after an exodus of talent — but he vowed no let-up in a political crackdown that has transformed the city.

John Lee, a Beijing-anointed former security chief, gave a debut policy speech that prioritised the revival of an economy mired in recession and maintaining security while recognising that many had left a city that serves as a gateway to China.

“Over the past two years, the local workforce shrank by about 140,000,” he said. “Apart from actively nurturing and retaining local talent, the government will proactively trawl the world for talent.”

The former British colony has lately undergone its most tumultuous period since its 1997 handover to China. 

Huge and sometimes violent democracy protests three years ago were followed by a sweeping clampdown on dissent as well as some of the world’s strictest coronavirus pandemic rules, many of which remained in place long after rivals reopened.

The city, which only scrapped mandatory quarantine for international arrivals last month, has seen its deficit soar while the border with the Chinese mainland remains all but closed because of Beijing’s strict zero-Covid rules.

– Talent office –

Lee’s speech offered his blueprint for reversing that downturn, including a talent scouting office, a HK$30 billion ($3.8 billion) co-investment fund to attract overseas businesses and rules to make it easier to hire foreigners.

The city will give preferential treatment to “top talent”, described as people who earn HK$2.5 million or more annually and graduates from the top 100 universities around the world who have relevant work experience.

Even with investor-friendly measures, rebooting Hong Kong will be tough.

Lee took office in July at a time of rising global interest rates, fears for China’s zero-Covid economy, uncertainty sparked by Russia’s Ukraine invasion and dents in Hong Kong’s business-friendly reputation.

The reaction from investors and analysts was lukewarm. 

Hong Kong’s stock exchange, which has lost more than a quarter of its value since the start of the year, closed down 2.38 percent on Wednesday.

“The government still lacks the sense of crisis and understanding of the actual situation,” public affairs commentator Derek Yuen told AFP, saying Lee’s policy focused more on Hong Kong being a gateway to China and less on being a truly international business hub.  

“(Officials) may be aware of the competition from within the region like Singapore but they don’t understand what makes other countries tick,” he added.

Baptist University political scientist Kenneth Chan said there was little to reassure foreign talent about Hong Kong’s core values.

“For a lot of people who are looking at Hong Kong… it’s a new era with a lot of uncertain elements, mostly political elements. They have to think very carefully before making the move and commit,” he told AFP.

– ‘Stability is the prerequisite’ –

After nearly three years, Hong Kong is gradually moving away from its version of China’s zero-Covid policy, which failed to keep out the virus and has left the city internationally cut off.

Authorities have axed the unpopular hotel quarantine for incoming travellers and loosened some social-distancing rules.

But the pace of reopening still lags behind regional rivals such as Singapore — which has gone on its own charm offensive to lure talent and has roared back as a global transport hub.

Overseas arrivals to Hong Kong, for example, cannot enter bars and restaurants for the first three days and Lee’s speech gave no details on a clear timeline to lifting all virus curbs. 

Lee did stress that the government would press ahead with more national security legislation and possible new rules on “false information”. 

“The development of Hong Kong allows no delay. Social stability is the prerequisite for our development, and we have to get rid of any interference,” he said.

Beijing imposed a sweeping national security law on Hong Kong in 2020 after democracy protests the year before, flipping the city’s once outspoken vibe.

Most prominent local democracy activists either are in jail, are awaiting trial or have fled overseas while schools have been ordered to turn students into Chinese patriots.

Lee’s policy speech — which lasted two hours and 45 minutes — also included major infrastructure projects to boost the economy and plans to deliver more housing in a city with one of the world’s least affordable property markets, something successive Hong Kong administrations have failed to tackle.

Investors battled to push markets higher again Wednesday following another healthy run-up on Wall Street boosted by more positive earnings results that raised hopes for the reporting season.

However, while there is a more upbeat mood on trading floors for now, analysts warned that the current rally could soon turn as central banks press on with interest rate hikes aimed at fighting multi-decade-high inflation.

In a sign of the uphill struggle in the battle against prices, the closely watched UK consumer price index jumped back above 10 percent last month owing to soaring food costs.

Forex traders were also keeping tabs on the yen as it edges closer to 150 per dollar, with Japanese officials holding off a second intervention in as many months but saying they are ready to act when necessary.

All three main indexes in New York enjoyed back-to-back gains as investors were heartened by forecast-beating results from Goldman Sachs and Johnson & Johnson.

They came on the heels of better-than-expected reports from banking giants Citi, JP Morgan and Wells Fargo.

Traders were given an extra boost by news that Netflix gained more than two million subscribers in July-September, easing worries about the impact of rising borrowing costs on consumers.

“Earnings season offers investors the opportunity to focus more on the actual earnings power of corporate America, and less on the machinations of the backward-looking economic data stream,” Art Hogan, a strategist at B. Riley, said.

“A better-than-feared earnings season may well be the catalyst the market needs to see a break in the steady grind lower.”

Still, Asian markets were mixed, with Hong Kong tanking as investors were left unimpressed with city leader John Lee’s first policy speech, which laid out plans to boost the economy but also saw a vow not to let up on a security crackdown.

There were also losses in Shanghai, Seoul, Taipei and Bangkok, though Tokyo, Sydney, Singapore, Wellington, Mumbai, Manila and Jakarta rose.

London edged down after the inflation reading and ahead of a keenly awaited Prime Minister’s Questions in parliament, the first since Liz Truss’s new finance minister tore up her controversial mini-budget that hammered markets last month.

The pound fell back below $1.13 as European trade began, having rallied in the previous two days on the government U-turn.

Paris and Frankfurt also dipped, while US futures rose.

– Dollar closes on 150 yen –

SPI Asset Management’s Stephen Innes warned there were still plenty of issues keeping a cap on equities including sticky inflation, weak sentiment, hawkish central banks, the Ukraine war, China’s economic woes and “a non-stop drum beat of recessionary rhetoric from vocal market participants”.

“The key to equity markets is (Federal Reserve) certainty, and that is the crucial turn on the road before the rates markets can settle back into a groove and Treasury volatility can decline,” he added.

“But for that to happen, the US data needs to roll over. Given the much-hotter-than-expected inflation data, the Fed may do the opposite of what the market wants — turning volatility up again.”

On currency markets, eyes were on Tokyo as the yen hovers just below 149.50 per dollar, with finance minister Shunichi Suzuki saying “we’ll respond appropriately against excessive moves”.

The unit is much weaker than the 145.90 level it touched last month before authorities stepped in, and analysts said they would likely act before it passes 150.

The yen has plunged more than 20 percent against the dollar as the Bank of Japan refuses to lift interest rates — citing a need to boost the economy — even as the Fed announces a series of bumper increases.

“If dollar-yen rises past the symbolic 150 level, price action will naturally accelerate, so they probably want to halt it before then or buy time,” said Yuji Saito of Credit Agricole CIB. 

Crude rose on renewed supply worries, having slumped Tuesday on bets that President Joe Biden would order the release of more barrels from US emergency reserves in order to keep fuel prices subdued heading into the winter and mid-term elections.

– Key figures around 0810 GMT –

Tokyo – Nikkei 225: UP 0.4 percent at 27,257.38 (close)

Hong Kong – Hang Seng Index: DOWN 2.4 percent at 16,511.28 (close)

Shanghai – Composite: DOWN 1.2 percent at 3,044.38 (close)

London – FTSE 100: DOWN 0.3 percent at 6,918.50

Pound/dollar: DOWN at $1.1290 from $1.1332 on Tuesday

Dollar/yen: UP at 149.35 yen from 149.21 yen

Euro/dollar: DOWN at $0.9836 from $0.9862 

Euro/pound: UP at 87.14 pence from 87.01 pence

West Texas Intermediate: UP 0.7 percent at $83.36 per barrel

Brent North Sea crude: UP 0.1 percent at $90.12 per barrel

New York – Dow: UP 1.1 percent at 30,523.80 (close)

British inflation jumped back above 10 percent in September on soaring food prices, official data showed Wednesday, with the country gripped by a cost-of-living crisis bedevilling the government.

The Consumer Prices Index accelerated to 10.1 percent on an annual basis, up from 9.9 percent in August, the Office for National Statistics said in a statement.

The September rate matched the level in July and is the highest in 40 years as a result also of sky-high energy bills.

“I understand that families across the country are struggling with rising prices and higher energy bills,” Britain’s new finance minister Jeremy Hunt said in a separate statement.

“This government will prioritise help for the most vulnerable while delivering wider economic stability and driving long-term growth that will help everyone.”

The government has been rocked by chaos in markets in the wake a budget that pledged tax cuts that would have been funded by state debt.

Most of those measures have since been reversed, leaving Prime Minister Liz Truss fighting to save her job.

Following widespread criticism over the budget, Truss sacked Hunt’s predecessor, Kwasi Kwarteng, after less than six weeks in the role.

Analysts said Wednesday’s data would put pressure on the Bank of England to keep raising its main interest rate by sizeable amounts.

Capital Economics noted that the BoE could hike its rate by as much as one percentage point to 3.25 percent at its next meeting in November.

– ‘Most pressing problem’ –

Victoria Scholar, head of investment at Interactive Investor, said inflation was “the most pressing economic problem facing the Bank of England as well as the government. 

“Without price stability, the cost-of-living crisis will continue to weigh on the economy by squeezing household budgets and dampening business margins.”

In a bid to help households, the government has capped domestic energy bills until April. However, the original plan was for a cap until late 2024, which Truss pulled earlier this week.

Markets were left spooked that a budget of tax cuts and a costly energy-price cap would add massively to British debt that had already ballooned on government support during the Covid pandemic.

Her budget sent the pound plunging to a record-low against the dollar and caused yields on government bonds to soar — forcing Truss into a huge budget U-turn that has calmed markets.

Following Wednesday’s data, the pound was down against the dollar and euro, while London’s FTSE 100 shares index steadied at the open.

burs/bcp/lth