European shares fall as selling pressure kicks in after recent gains

European indexes fell in early trading and US futures were down as selling pressure kicked in Wednesday after a few days of strong gains.

Asian shares advanced, led by a nearly 6 per cent jump in Hong Kong's share benchmark as markets there caught up after reopening from a holiday.

Easing concerns about interest rate hikes by central banks have helped push markets higher in the past few days, but worries over inflation persist.

Britain's FTSE 100 fell 1.2 per cent to 7,002.15 ahead of a speech by British Prime Minister Liz Truss where she was expected to defend her economic plans, including tax cuts that have roiled markets.

 

Truss says she will stick with her plan to reshape Britain's economy through tax cuts and deregulation in a bid to end years of sluggish growth and create a new Britain for the new era.

France's CAC 40 fell 0.7 per cent to 5,996.89 in early trading, while Germany's DAX slipped 0.8 per cent to 12,574.14. The future for the S&P 500 was down 0.7 per cent while that for the Dow industrials also lost 0.7 per cent.

On Tuesday, the Dow Jones Industrial Average climbed more 2.8 per cent while the S&P 500 surged 3.1 per cent. The Nasdaq composite climbed 3.3 per cent and the Russell 2000 advanced 3.9 per cent.

New Zealand's share benchmark rose 0.8 per cent after its central bank hiked its benchmark interest rate to 3.5 per cent, saying inflation remained too high, most recently at 7.3 per cent, and labour scarce. The half-point rate hike was the fifth in a row by the Reserve Bank of New Zealand since February.

The Hang Seng in Hong Kong rose 5.9 per cent to 18,087.97, catching up with gains elsewhere as markets reopened following a holiday on Tuesday. Markets in mainland China remained closed for a holiday.

Japan's benchmark Nikkei 225 added 0.5 per cent to finish at 27,120.53. Australia's S&P/ASX 200 climbed 1.7 per cent to 6,815.70, helped by a smaller-than-expected 25 basis points interest rate hike on Tuesday.

South Korea's Kospi gained 0.3 per cent to 2,215.22.

Analysts said the latest data on South Korea's inflation may push the Bank of Korea to raise interest rates at its meeting set for next week, but such hikes were expected to slow in pace as inflation is brought under control.

We expect headline inflation to rise again in October. Gasoline prices will likely decline further, but city gas and power rates were raised at the beginning of October and fresh food prices will also probably rise ahead of winter, said a report by Robert Carnell, regional head of research Asia-Pacific at ING.

Investors have been looking for signs that central banks might ease up on aggressive rate hikes aimed at taming the hottest inflation in four decades. The rate hike by Australia's central bank was smaller than previous ones.

Investors are watching closely as central banks raise interest rates to make borrowing more difficult and slow economic growth to try to tame inflation.

Economic growth is already slowing globally and the US economy contracted during the first two quarters of the year, which is considered an informal signal of a recession.

Wall Street will get a more detailed look at employment in the US this week, with a report on hiring by private companies due later on Wednesday, the latest tally of weekly applications for unemployment benefits on Thursday and the government's monthly jobs report for September on Friday.

In energy trading, benchmark US crude fell 46 cents to USD 86.06 a barrel in electronic trading on the New York Mercantile Exchange. It surged USD 2.89 to USD 86.52 on Tuesday. Brent crude, the international standard for pricing, lost 37 cents to USD 91.43 a barrel.

In currency trading, the US dollar rose to 144.34 Japanese yen from 144.20 yen. The euro cost 99.50 cents, down from 99.87 cents.