World shares mixed; British pound slides on tax cut concerns
TOKYO Global share were mixed Monday, while the British Pound fell to an all-time low against U.S. dollars on concerns about planned tax cuts.
France’s CAC 40 rose 0.2% in early trading to 5,795. 88, while Germany’s DAX added 0.2% to 12,311.57. Britain’s FTSE 100 edged 0.1% higher to 7,025.51.
Futures for the Dow industrials were 0.1% lower than the S&P 500.
In Asian trading, Japan’s benchmark Nikkei 225 shed 2.7% to finish at 26,431.55. Australia’s S&P/ASX 200 dipped 1.6% to 6,469.40. South Korea’s Kospi dropped 3.0% to 2,220.94. Hong Kong’s Hang Seng gave up 0.4% to 17,855. 14, while the Shanghai Composite lost 1.2% to 3,051.23.
The British pound’s slide against the dollar picked up pace last week after the U.K.’s new government outlined plans to cut taxes and boost spending. The weakening currency puts pressure on the U.K.’s new Conservative government. It has gambled that cutting taxes and increasing borrowing to compensate will increase economic growth. Many economists believe it is more likely to fuel high inflation, drive down the value of U.K. government borrowing, and create a storm of economic headwinds.
The pound dropped as low as $1. 0349 per U.S. Dollar early Monday, but then rebounded back to $1. 0770, fell 2.3% It dropped 3% on Friday. The recent moves by the U.S. Federal Reserve (and other central banks) to raise interest rates are intended to reduce decades-high inflation but also increase the risk of a recession.
Last week, the Fed lifted its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%. It was close to zero at the beginning of the year. The Fed also released a forecast that its benchmark rate could rise to 4.4% by year’s end. This is a full point higher then what was expected in June.
In energy trading on Monday, benchmark U.S. crude fell 70 cents to $78. 04 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude oil prices fell 5.7% Friday to their lowest level since early this year, citing concerns that a weaker world economy will use less fuel.
Brent crude, the international standard, edged down 93 cents to $85. 22 a barrel. The recent rise in the U.S. Dollar against other currencies is a concern to many countries. It affects profits of U.S. companies doing business overseas and puts a financial strain on many countries in the developing world.
When the dollar approached 146 yen last week, the Japanese government and the Bank of Japan intervened. The dollar has been trading at about 143 yen since then.
It edged up Monday to 143. 65 Japanese yen from 143. 32 yen late Friday. The euro cost 96. 81 cents, down from 96. 88 cents.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
I have been writing professionally for over 20 years and have a deep understanding of the psychological and emotional elements that affect people. I’m an experienced ghostwriter and editor, as well as an award-winning author of five novels.