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Global Stocks Fall as Investors Cut Risk Ahead of Rate Increases

Global stock markets declined and futures for U.S. indexes fell, as investors continued to fret about the prospects for slowing economic growth and higher interest rates in the U.S.

By late afternoon Friday in Hong Kong, futures tied to the S&P 500 stood about 0.1% lower, while those for the Nasdaq-100 declined 0.4%, suggesting that U.S. markets could come under pressure again after posting losses Thursday. However, both contracts pared earlier losses and futures tied to the Dow Jones Industrial Average advanced 0.1%.

Shares in the Asia-Pacific region broadly retreated, with Australia’s S&P/ASX 200 closing 2.3% lower and Japan’s Nikkei 225 shedding 0.9%. Hong Kong’s Hang Seng stood 0.4% lower, partially reversing gains logged in the previous session, with e-commerce giant Alibaba Group Holding declining 3.3%.

In Europe, the Stoxx 600 index lost about 1.3% in early trading.

The Nasdaq Composite Index entered correction territory this week, and investors have been dumping shares of unprofitable technology companies that make up one of the riskiest corners of the market.

Investors are pulling back from stocks, including in markets in Asia and some Chinese shares, said Herald van der Linde, head of Asia-Pacific equity strategy at HSBC. “They’re taking money out of the U.S.; they’re taking money out of the emerging markets as well,” he said.

U.S. stock-index futuresSource: FactSetAs of Jan. 21, 4:35 a.m. ET

S&P 500Nasdaq-100Jan. 20Jan. 21-1.75-1.50-1.25-1.00-0.75-0.50-0.250%

Sentiment has been rattled by a growing conviction that the U.S. Federal Reserve will have to raise interest rates several times this year to combat inflation. Fed Chairman Jerome Powell last week called rapid inflation a “severe threat” to a full economic recovery, and data showed consumer prices soaring 7% year-over-year in December.

“There’s a massive amount of sensitivity to changing inflationary expectations, and their impact on growth stocks,” said Will Malcolm, portfolio manager for emerging-market and Asia-Pacific equities at Aviva Investors.

Prices for benchmark government bonds rose, partially reversing a recent selloff that has helped put pressure on the shares of highly valued tech stocks. That pushed down yields, which move inversely to prices, with the yield on the 10-year U.S. Treasury note falling to 1.783%, according to Tradeweb, from 1.833% Thursday.

In the commodity markets, Brent crude oil futures fell 1.8% to about $86.79.

Bitcoin came under fresh pressure after a recent selloff, dropping to about $38,839, according to CoinDesk. That was a decline of about 6.2% from prices late Thursday afternoon in New York. The cryptocurrency has fallen 15% so far this year, CoinDesk figures show.

-WSJ