Global stocks fall as investors await U.S. inflation update

TOKYO – Global stocks mostly fell on Tuesday after a slump on Wall Street erased recent gains. US futures and oil prices also fell.

Investors are on the lookout this week for updates on inflation and corporate earnings, as new coronavirus outbreaks add to jitters. Equities in Europe fell in early trading. Benchmarks ended lower in Tokyo, Seoul, Hong Kong and Shanghai but rose slightly in Sydney.

The Euro traded at $1.0004, down from $1.0042, after falling to $1.0005. The US dollar fell slightly to 137.17 Japanese yen from 137.47 yen.

Both currencies are trading at 20-year lows as the dollar surged along with US interest rates, promising higher returns for investors.

The common European currency is on the verge of falling below parity, or lining up with the dollar. The last time the euro was below $1 was July 15, 2002.

France’s CAC 40 slid 0.5% in early trading to 5,965.08, while Germany’s DAX fell 0.9% to 12,718.93. Britain’s FTSE 100 edged down 0.3% to 7,176.30. Dow Jones and S&P 500 futures were down 0.7%.

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In Asian trading, Japan’s benchmark Nikkei fell 1.8% to 26,336.66. Australia’s S&P/ASX 200 gained nearly 0.1% to 6,606.30. The South Korean Kospi slipped 1.0% to 2,317.76. Hong Kong’s Hang Seng fell 1.3% to 20,844.74, while the Shanghai Composite Index lost 1% to 3,281.47 on growing concerns over COVID-19.

Adding to the pessimism, Hong Kong authorities announced that they were considering setting up an electronic health code system to restrict the movements of people infected with COVID-19, as well as arrivals abroad, a system similar to what is already in place in mainland China.

The highest inflation in four decades is causing the Federal Reserve and other central banks to raise interest rates, which is putting the brakes on the economy and hurting various types of investments.

This week, companies are expected to start reporting on their spring earnings performance. Big banks and other financial companies dominate the first part of the calendar, with JPMorgan Chase and Morgan Stanley scheduled for Thursday. BlackRock, Citigroup and Wells Fargo are among those reporting on Friday.

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Expectations for second quarter results appear low. Analysts predict growth of 4.3% for S&P 500 companies, which would be the weakest since the end of 2020, according to FactSet.

Even if companies end up reporting better than expected results, which they usually do, analysts say the focus will be more on what CEOs say about their earnings trends later in the year.

Beyond earnings updates, this week’s inflation reports will likely dominate trading. On Wednesday, economists expect a report to show consumer inflation accelerated further last month, to 8.8% from 8.6% in May.

In energy trading, benchmark U.S. crude fell $2.87 to $101.22 a barrel. It lost 70 cents to $104.09 a barrel on Monday. Brent crude, the international price standard, fell $2.43 to $104.67 a barrel.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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