TOKYO (AP) — Global stocks fell Wednesday after a shaky day on Wall Street as markets feared the prospect of a possible recession.
US futures and oil prices fell and the Chinese yuan weakened sharply.
Trading has been volatile since the Dow Jones Industrial Average trailed other major U.S. indices in a bear market earlier this week.
In early trading, the German DAX fell 1.3% to 11,983.29 and the FTSE 100 in London was also down 1.3% to 6,895.21. In Paris, the CAC40 lost 0.9% to 5,702.50.
The futures contract for the S&P 500 was 0.8% lower and the contract for the Dow Industrials lost 0.6%.
The Chinese yuan fell to its lowest level in 14 years against the dollar on Wednesday despite the central bank’s efforts to stem the fall after interest rate hikes in the United States prompted traders to convert their money into dollars in search of higher returns.
The yuan fell to 7.2301 to the dollar, its lowest level since January 2008. One yuan was worth around 13.8 cents, down 15% from its peak in March.
A weaker yuan helps Chinese exporters by making their goods cheaper overseas, but it encourages capital to flow out of the economy. This increases costs for Chinese borrowers and delays the ruling Communist Party’s efforts to boost weak economic growth.
Chinese stocks weakened, with the Shanghai Composite Index losing 1.6% to 3,045.07. The Hang Seng in Hong Kong plunged 3.4% to 17,250.88.
Elsewhere in Asia, Tokyo’s Nikkei 225 index fell 1.5% to 26,173.98 while Seoul’s Kospi lost 1.5% to 2,169.29. In Sydney, the S&P/ASX 200 fell 0.5% to 6,462.00.
The week began with a broad selloff that sent the Dow Jones Industrial Average into a bear market, joining other major US indices.
On Tuesday, the S&P 500 slid 0.2%, its sixth consecutive decline. The Dow Jones fell 0.4% and the Nasdaq composite finished with a 0.2% gain.
Small company stocks held up better than the broader market. The Russell 2000 added 0.4%.
Major indexes remain in a prolonged slump on fears that higher interest rates used to fight inflation could push economies into recession.
The S&P 500 fell about 8% in September and has been in a bear market since June, when it fell more than 20% below its all-time high set on Jan. 4. The Dow’s decline on Monday put it in the same company as the benchmark and the tech-heavy Nasdaq.
Central banks around the world have raised interest rates to make borrowing more expensive and calm the highest inflation in decades. The Federal Reserve has been particularly aggressive. It raised its benchmark rate again last week, which affects many consumer and business loans. It is now in a range of 3% to 3.25%, but was close to zero at the start of the year.
The Fed also released a forecast suggesting that its benchmark rate could be 4.4% by the end of the year, one percentage point higher than it was looking at in June.
Wall Street fears that the Fed is putting the brakes on an already slowing economy too hard and pushing it into a recession. Higher interest rates have weighed on stocks, especially more expensive tech companies, which tend to look less attractive to investors as rates rise.
Investors will be watching the next round of corporate earnings very closely to get a better idea of how companies are handling inflation. Companies will start publishing their latest quarterly results in early October.
The government will release its weekly report on unemployment benefits on Thursday, along with an updated report on gross domestic product for the second quarter. On Friday, the government will release another personal income and spending report that will help provide more detail on where and how inflation is hurting consumer spending.
In other trading on Wednesday, benchmark U.S. crude fell 26 cents to $78.24 a barrel in electronic trading on the New York Mercantile Exchange.
Brent crude, used to price international oils, fell 23 cents to $84.64 a barrel in London.
The dollar fell to 144.71 Japanese yen from 144.81 yen. The euro was at 95.55 cents, down from 95.92 cents.