Global stocks fall after UK’s Truss defends tax cuts

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

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

The future for Wall Street’s benchmark S&P 500 index was down 1.3%. Oil prices lost more than $1 per barrel after jumping more than $3 the previous day.

Stocks and the British pound fell Tuesday on fears Truss’s tax cuts would push up already high inflation. Markets rebounded Wednesday after the Bank of England said it would buy government bonds to stop a price slide.

Markets fell back Thursday after Truss shrugged off criticism and a public appeal by the International Monetary Fund to scrap the tax cut plans. Truss said she is willing to make “difficult decisions” to get the economy growing.

“The U.K. government needs to offer a credible fiscal plan to complement the BoE’s financial stabilization in a way that supports long-term growth without boosting inflation expectations,” David Chao of Invesco said in a report.

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

On Wall Street, the future for the Dow Jones Industrial Average was off 1%.

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

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

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

The Kospi in Seoul added 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 shed 0.2% to 56.488.34. New Zealand, Singapore and Bangkok gained while Jakarta declined.

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

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

Forecasters see more turbulence ahead due to worries 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 exceeded 4% on Wednesday, its highest level in a decade.

Investor increasingly worry aggressive interest rate hikes this year by the U.S. Federal Reserve and central banks in Europe and Asia to cool inflation that is at multi-decade highs might tip the global economy into recession.

The investment giant Vanguard puts the chance of a U.S. recession at 25% this year and at 65% next year if the Fed follows through on expectations it will raise rates again and keep them elevated through next year.

In energy markets, benchmark U.S. crude lost $1.08 to $81.07 per barrel in electronic trading on the New York Mercantile Exchange. The contract surged $3.65 on Wednesday to $82.15. Brent crude, the price basis for international oils, shed $1.19 to $86.86 per barrel in London. It gained $3.05 the previous session to $89.32.

The dollar rose to 144.68 yen from Wednesday’s 143.96 yen. The euro declined to 96.51 cents from 97.43 cents.

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