World shares mixed as investors eye inflation, China outlook

Shares opened lower in Europe and oil prices sank Thursday, after Italian Premier Mario Draghi resigned following a boycott of a confidence vote by key coalition allies.

The change likely signals an early election and more uncertainty for Italy and for Europe as a whole at a time when the region is forecast to fall into recession thanks to energy shortages and other spillover effects of the war in Ukraine.

Germany’s DAX lost 0.6% to 13,202.55 while the CAC 40 in Paris edged 0.1% lower to 6,178.49. Britain’s FTSE 100 shed 0.5% to 7,229.41. On Wall Street, the future for the S&P; 500 slipped 0.2% lower while that for the Dow industrials was down 0.3%.

Italy’s benchmark index, the FTSE MIB, dropped 0.2% to 20,925.90. It started the year around 28,000.

Draghi’s government of national unity imploded Wednesday after members of his uneasy coalition of right, left and populists rebuffed his appeal to band back together to finish the legislature’s natural term and ensure implementation of the European Union-funded pandemic recovery program.

The disarray comes at a time when Italy is dealing with soaring inflation and energy costs, Russia’s war against Ukraine and outstanding reforms needed to clinch the remainder of the EU’s 200 billion euros in recovery funds.

The European Central Bank was expected to announce an interest rate hike on Thursday, its first in 11 years, to try to bat down inflation.

U.S. benchmark crude shed $3.86 to $96.02 a barrel in electronic trading on the New York Mercantile Exchange early Thursday. It shed 86 cents to $99.88 per barrel on Wednesday. Brent crude, the international pricing standard, lost $3.81 to $103.11 a barrel.

The euro’s cost was unchanged at $1.0179, while the U.S. dollar rose to 138.80 Japanese yen from 138.25 yen.

In Asia, investors were keeping an eye on inflation and prospects for the slowing Chinese economy.

Tokyo’s benchmark Nikkei 225 edged up 0.4% to finish at 27,803.00 after the Bank of Japan wrapped up a two-day policy meeting without any major policy changes, as was widely expected.

The BOJ has indicated it does not intend to follow the lead of other central banks, including the U.S. Federal Reserve, in raising interest rates to curb inflation. Japan has suffered years of stagnation, when deflation or falling prices was a major problem.

Japan reported its trade deficit for the first half of this year totaled nearly 8 trillion yen ($58 billion), pushed higher by surging oil prices and a weaker yen.

The deficit for the period from January through June marked the second consecutive half-year of deficits. Imports for the six months shrank nearly 38% to 53.86 trillion yen ($390 billion), while exports grew 15% to 45.94 trillion yen ($332 billion).

In June, imports surged 46% while exports grew 19%, compared to the same month a year earlier. Imports from the Middle East, source of a large share of Japan’s energy supplies, jumped 125%.

Australia’s S&P;/ASX 200 advanced 0.5% to 6,794.30 and South Korea’s Kospi gained 09% to 2,409.16.

But Hong Kong’s Hang Seng slipped 1.5% to 20,574.63, while the Shanghai Composite fell 1.0% to 3,272.00.

A mid-week rally driven by strong corporate earnings appeared to be losing steam.

“After the strong showing in Wall Street over the past two days, particularly so for tech stocks, markets may take somewhat of a breather. Lingering caution persists for Chinese equities amid both virus and property sector risks,” Yeap Jun Rong, market strategist at IG in Singapore, said in a commentary.

On Wednesday, Wall Street ended with gains as investors welcomed another batch of encouraging profit reports from U.S. companies.

The S&P; 500 rose 0.6%. The Dow Jones Industrial Average added 0.2%, while the Nasdaq gained 1.6%. The Russell 2000 climbed 1.6% to 1,827.95.

Profit reporting season is ramping up, with more types of industries offering details about how high inflation and worries about a possible recession are affecting their customers.


Yuri Kageyama is on Twitter

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