San Francisco Frontiers - Markets slip as inflation, rates worry investors

Wall Street closed relatively flat following mixed corporate results, and as a Federal Reserve report said that the US economy was "little changed" in recent weeks.

Results from US regional banks will also be coming into focus after last month's turmoil in the sector that saw three go under and Credit Suisse taken over.

Markets have in recent days been optimistic that central banks, and particularly the Fed, will be able to wind down their rate hiking drive soon after data showed inflation coming down, even if at a slower pace than wanted.

But investors were jolted by news that UK prices were still elevated, rising more than 10 percent on-year last month owing to soaring food costs, fanning bets the Bank of England will have to keep tightening monetary policy.

It also showed that inflation remains stubbornly high and that officials still have their work cut out to bring it down.

"Broader markets are likely still in hawkish shock after the hotter-than-hot UK CPI (consumer prices index) brought back into focus that global inflation is proving more difficult to stamp out amid underlying solid demand," analyst Stephen Innes, of SPI Asset Management, said.

The BoE has hiked rates 11 times since late 2021 in an unsuccessful bid to keep inflation close to a two percent target.

In the United States, the Fed said in its quarterly Beige Book update on the world's top economy that it had stalled in recent weeks and that liquidity was tightening in the wake of the banking upheaval.

"Several districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity," the report said, adding that "overall price levels rose moderately during this reporting period, though the rate of price increases appeared to be slowing".

There was also little inspiration from the corporate world after Morgan Stanley and tech titan IBM reported better-than-expected earnings but Tesla missed expectations with profits down about a quarter on-year in January-February.

The flat US markets were a reflection of the "pretty mixed" earnings results in recent days, said Maris Ogg from Tower Bridge Advisors.

"We'll see what happens when we really start getting the regional banks next week," she added.

In Asian earnings, Taiwanese chip behemoth TSMC reported an unexpected jump in first-quarter profits, tempering concerns that it would be slammed by a slowdown in global demand.

Markets swung mostly lower in Asian trade, with Sydney, Shanghai, Singapore, Seoul, Wellington, Bangkok and Taipei down, while London, Paris and Frankfurt opened lower.

But Tokyo, Hong Kong, Manila and Mumbai edged up.

Oil prices extended losses, having shed two percent Wednesday on fears that the Fed could continue to hike rates, in turn denting demand for crude.

- Key figures around 0720 GMT -

Tokyo - Nikkei 225: UP 0.2 percent at 28,657.57 (close)

Hong Kong - Hang Seng Index: UP 0.2 percent at 20,403.22

Shanghai - Composite: DOWN 0.1 percent at 3,367.03 (close)

London - FTSE 100: DOWN 0.1 percent at 7,894.20

Euro/dollar: DOWN at $1.0955 from $1.0963 on Wednesday

Pound/dollar: UP at $1.2437 from $1.2435

Dollar/yen: DOWN at 134.51 yen from 134.68 yen

Euro/pound: DOWN at 88.06 pence from 88.08 pence

West Texas Intermediate: DOWN 1.3 percent at $78.15 per barrel

Brent North Sea crude: DOWN 1.3 percent at $82.07 per barrel

New York - Dow: DOWN 0.2 percent at 33,897.01 (close)

G.Allen--SFF