Wall Street points to more losses when markets open for the first day of a new quarter with new data showing business sentiment in Japan at rock bottom and inflation in Europe at record highs.
Dow Jones Industrial Average futures fell 0.4% on Friday, as did S&P 500 futures.
Annual inflation in the 19 euro zone countries reached 8.6% in June, surpassing the 8.1% recorded in May, according to the European Union’s statistics agency, Eurostat. Inflation is at its highest level since the start of the euro registration in 1997.
Stocks in Europe swung from gains to losses on the report. The Paris CAC 40 and Germany’s DAX both fell 0.3% and Britain’s FTSE 100 fell 0.1%.
Shares in Asia also fell after a quarterly report from Japan’s central bank rekindled concerns about the world’s third-largest economy.
In the Bank of Japan’s “tankan” survey, the overall index for large manufacturers was 9, down from 14 in the previous quarter and the second straight quarter of decline. The tankan measures business sentiment by subtracting the number of companies that say business conditions are negative from those that say they are positive.
Non-manufacturing indicator numbers were better, but concerns are growing due to pressure from the weaker Japanese yen.
Among the positive news, a survey by a Chinese business magazine, Caixin, found that Chinese factory activity grew in June at its fastest pace in 13 months following an easing of virus restrictions that have closed Shanghai and other industrial centers.
A monthly Purchasing Managers’ Index released by Caixin rose to 51.7 from 48.1 in May on a 100-point scale where numbers above 50 show increased activity. New orders rose while employment fell for a third month.
Japan’s benchmark Nikkei 225 fell 1.7% to end at 25,935.62. Australia’s S&P/ASX 200 edged down 0.4% to 6,539.90. The South Korean Kospi fell 1.2% to 2,305.42. The Shanghai Composite fell 0.3% to 3,387.64.
Hong Kong markets have been closed for a holiday.
Rising inflation is behind much of the broader market slump this year as companies raise prices, which squeezes consumers.
A potential deal to sell department store chain Kohl fell apart on Friday, with the company citing a tough retail environment as the main hurdle. Shares of Wisconsin-based Kohl’s fell 19% before the bell. Potentially signaling levels of anxiety in the retail sector with consumers withdrawing, it was the second time this week that a major company has waived a potential sale.
The Federal Reserve and other central banks have aggressively raised interest rates in an attempt to slow economic growth in order to calm inflation. Higher rates risk causing a recession if they slow economies down too much. They also hurt the prices of stocks, bonds, cryptocurrencies, and other investments.
A measure of inflation closely monitored by the Fed rose 6.3% in May from a year earlier, unchanged from its April level. The Commerce Department report also says consumer spending grew at a slow 0.2% from April to May.
The update follows a worrying report earlier this week that consumer confidence had slipped to its lowest level in 16 months. The government also reported that the US economy contracted 1.6% in the first quarter. Weak consumer spending was a key driver of this contraction.
The OPEC oil cartel and allied producing nations decided on Thursday to increase crude oil production, but the amount is unlikely to help relieve high gasoline prices at the pump and inflation fueled by the energy plaguing the global economy.
In energy trading, benchmark U.S. crude added $3.01 to $108.77 a barrel in electronic trading on the New York Mercantile Exchange. Brent, the international standard, rose $3.17 to $112.20 a barrel.
In currency trading, the US dollar slipped to 135.23 Japanese yen from 135.75 yen. The euro traded at $1.0419, down from $1.0484.