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Global Stocks Sink on Fed Comments     01/27 05:04

   Global stock markets and Wall Street futures sank Thursday after the Federal 
Reserve indicated it will raise interest rates soon to cool inflation.

   BEIJING (AP) -- Global stock markets and Wall Street futures sank Thursday 
after the Federal Reserve indicated it will raise interest rates soon to cool 
inflation.

   London and Frankfurt opened lower. Market benchmarks in Tokyo and Seoul fell 
by an unusually wide margin of more than 3%.

   The Fed said Wednesday in a statement that it "expects it will soon be 
appropriate" to raise rates. Investors expect as many as four increases this 
year, starting in March. Monthly bond purchases that push down long-term rates 
by injecting money into the financial system would be phased out in March, the 
Fed said.

   "The Fed's decision will reverberate globally, meaning that the era of low 
interest rate, ultra-low interest rate, is over," said Francis Lun, CEO of Geo 
Securities in Hong Kong. "All the central banks will start to fight inflation 
instead of trying to stimulate the economy."

   In early trading, the FTSE 100 in London was down 0.2% at 7,452.31 and 
Frankfurt's DAX lost 1.5% to 15,233.46. The CAC 40 in Paris fell 1% to 6,918.14.

   On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones 
Industrial Average were down 0.5%.

   On Wednesday, the S&P 500 ended down 0.1% following the Fed announcement 
after being up 2.2% earlier in the day.

   The Dow Jones Industrial Average fell 0.4%. The Nasdaq composite ended 
little-changed, shedding a 3.4% gain earlier.

   In Asia, the Nikkei 225 in Tokyo fell 3.1% to 26,170.30 and the Hang Seng in 
Hong Kong retreated 2% to 23,807.00.

   The Kospi in Seoul sank 3.5% to 2,614.49 after a stunning market debut for 
LG Energy Solutions, one of the biggest makers of batteries for electric cars. 
It ended the day with South Korea's second-highest stock market value behind 
Samsung Electronics after its initial public offering drew 13 trillion won ($11 
billion) in bids.

   The Shanghai Composite Index declined 1.8% to 3,394.25 and Sydney's S&P-ASX 
200 shed 1.8% to 6,838.30.

   India's Sensex lost 0.8% to 57,423.10. New Zealand declined after inflation 
accelerated to a 30-year high of 5.9% over a year earlier in the final quarter 
of 2021. Jakarta advanced while Bangkok and Singapore fell.

   On Wednesday, major Wall Street indexes rose immediately after the Fed 
statement but gave up their gains as Chair Jerome Powell took questions about 
how and when the central bank will let its balance sheet shrink after buying 
trillions of dollars of bonds through the pandemic. That would put upward 
pressure on market interest rates.

   The selling accelerated as Powell acknowledged high inflation that has 
squeezed businesses and consumers isn't getting better. That could force the 
Fed to get even more aggressive about raising rates and removing its support 
for markets.

   The last time the Fed raised rates and shrank its balance sheet at the same 
time was in late 2018. The S&P 500 lost nearly 20%.

   "Since the December meeting, I'd say the inflation situation is about the 
same but probably slightly worse," Powell said.

   Powell said there is room to raise interest rates without hurting the labor 
market, and wouldn't rule out the possibility that the Fed could raise 
short-term rates at any of its seven remaining meetings this year or opt for a 
larger-than-usual increase at any one of them.

   The Fed's near-zero interest rates helped to boost stock prices for nearly 
two years, but markets have been volatile since Powell and other officials in 
mid-December said plans to wind down economic stimulus might be accelerated to 
fight surging inflation.

   In energy markets, benchmark U.S. crude lost 30 cents to $87.05 per barrel 
in electronic trading on the New York Mercantile Exchange. The contract rose 
$1.75 to $87.35 on Wednesday. Brent crude, the price basis for international 
oils, shed 39 cents to $88.35 per barrel in London. It advanced $1.76 the 
previous session to $89.96.

   The dollar edged up to 115.00 yen from Wednesday's 114.55 yen. The euro 
declined to $1.1200 from $1.1254.

 
 
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