Global shares track Wall Street slide on higher rate hike expectations

Global shares were lower on Thursday, tracking a broad slide on Wall Street, as investors braced for higher interest rates and inflation worries for some time.

France's CAC 40 declined 1.6 per cent to 6,025.93 in early trading, while Germany's DAX slipped 1.6 per cent to 12,633.32.

Britain's FTSE 100 was down 1.6 per cent at 7,164.45. US shares were set to drift lower, with Dow futures falling 0.6 per cent to 31,350.00 and S and P 500 futures declining nearly 0.8 per cent to 3,926.00.

Benchmarks finished lower in Asia. Japan's benchmark Nikkei 225 dipped 1.5 per cent to finish at 27,661.47.

Australia's S and P/ASX 200 dropped 2.0 per cent to 6,845.60. South Korea's Kospi shed 2.3 per cent to 2,415.61.

Hong Kong's Hang Seng lost 1.8 per cent to 19,597.31, while the Shanghai Composite declined 0.5 per cent to 3,184.98. Oil prices fell.

The slide in the Nikkei came despite signs of improvement in the Japanese economy. A study by the Finance Ministry on corporate financial statements for April-June showed a 17.6 per cent improvement from the same period the previous year.

At some point central banks will discover inflation is remaining high despite their interest rate hikes and they will stop. Unfortunately, for the economy on Main Street, that point is too far off in the distance. It is difficult to see any near-term end in sight for increased caution by consumers and businesses across Europe, China, and the US, said Clifford Bennett, chief economist at ACY Securities.

The latest pullback for stocks came as Treasury yields rose broadly. The yield on the 10-year Treasury, which influences interest rates on mortgages and other consumer loans, rose to 3.17 per cent from 3.11 per cent late Tuesday.

Bond yields have been rising along with expectations of higher interest rates, which the Federal Reserve has been increasing in a bid to squash the highest inflation in decades.

The last time stocks mounted a big rally was in July and early August, when bond yields came off their highs as expectations of higher rates eased. Higher interest rates also hurt investment prices, especially for pricier stocks such as technology companies.

Traders are now trying to get a better sense of how far and how quickly the Fed's rate hikes will go. The Fed has already raised interest rates four times this year and is expected to raise short-term rates by another 0.75 percentage points at its September meeting, according to CME Group.

In energy trading, benchmark US crude fell USD 1.34 to USD 88.21 a barrel. Brent crude, the international standard, slipped USD 1.40 to USD 94.24 a barrel.

In currency trading, the US dollar rose to 139.21 yen from 139.04 yen. The euro cost USD 1.0038, down from USD 1.0054.