European markets fall after UK Prime Minister Liz Truss defends tax cut plan

BEIJING (AP) — European stocks fell Thursday and Asian markets were mixed after British Prime Minister Liz Truss championed a tax cut plan that rattled investors.

London’s benchmark market fell 2.3% and Frankfurt lost 1.9% in early trading. Shanghai and Hong Kong also declined. Tokyo and Seoul advanced.

Wall Street’s benchmark S&P 500 futures were down 1.3%. Oil prices lost more than $1 a barrel after jumping more than $3 the previous day.

Stocks and the British pound fell on Tuesday on fears that Truss’s tax cuts would push up already high inflation. Markets rallied on Wednesday after the Bank of England said it would buy government bonds to stem falling prices.

Markets retreated on Thursday after Truss rejected criticism and a public call from the International Monetary Fund to scrap tax cut plans. Truss said she was prepared to take “difficult decisions” to grow the economy.

“The UK government must deliver a credible fiscal plan to complement the BoE’s financial stabilization in a way that supports long-term growth without raising inflation expectations,” said David Chao of Invesco in a report.

In early trade, London’s FTSE 100 fell to 6,846.34 and Frankfurt’s DAX fell to 11,957.72. The CAC 40 in Paris sank 1.8% to 5,660.81.

On Wall Street, Dow Jones Industrial Average futures were down 1%.

On Wednesday, the S&P 500 rose 2% and the Dow rose 1.9%. The Nasdaq composite rose 2.1%.

In Asia, the Shanghai Composite closed up 0.1% at 3,041.20 after spending most of the day in positive territory.

Tokyo’s Nikkei 225 gained 1% to 26,422.05, while Hong Kong’s Hang Seng lost 0.5% to 17,165.87.

Seoul’s Kospi rose less than 0.1% to 2,170.93 and Sydney’s S&P ASX 200 was 1.4% higher at 6,555.00.

India’s Sensex was down 0.2% at 56,488.34. New Zealand, Singapore and Bangkok won while Jakarta went down.

The British pound was trading at about $1.08, up from Monday’s all-time low of $1.0373. It has lost 4% of its value since Friday.

Despite Wednesday’s gain, the S&P 500 is down more than 20% from its Jan. 3 high, putting it in what traders call a bear market.

Forecasters see more turbulence ahead due to concerns about a possible recession, higher interest rates and even higher inflation.

The yield on the 10-year U.S. Treasury, or the difference between its market price and the payout if held to maturity, briefly topped 4 percent on Wednesday, its highest level in a decade.

Investors are increasingly concerned that aggressive interest rate hikes this year by the U.S. Federal Reserve and central banks in Europe and Asia to cool inflation at multi-decade highs may sending the world economy into recession.

Investment giant Vanguard puts the chance of a US recession at 25% this year and 65% next year, if the Fed lives up to expectations it will raise rates again and keep them high for next year

In energy markets, benchmark U.S. crude lost $1.08 to $81.07 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $3.65 on Wednesday to $82.15. Brent crude, the benchmark for international oil prices, was down $1.19 at $86.86 a barrel in London. It gained $3.05 in the previous session to $89.32.

The dollar rose to 144.68 yen from 143.96 yen on Wednesday. The euro fell from 97.43 cents to 96.51 cents.


AP writers Jill Lawless and Danica Kirka in London contributed to this report.

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