Global markets mostly sink on Fed chief's remarks

Global markets mostly sink on Fed chief’s remarks

Global stock markets slid Friday after the Federal Reserve warned of an aggressive tightening of monetary policy to tame runaway inflation.

Frankfurt and Paris stocks were down almost two percent in late afternoon deals while London lost one percent as investors shrugged off a survey showing the bloc’s economic activity accelerated in April.

Wall Street was also glum shortly after the opening bell as the Dow sank 0.9 percent while the S&P index and the tech-rich Nasdaq were showing smaller losses half an hour into the session.

Sterling slumped against the dollar to an 18-month low after data showed tumbling British retail sales amid a cost-of-living crisis. The euro also slid against the US currency.

Oil prices slumped on demand fears arising from rising interest rates in the United States and ongoing Covid restrictions in China.

– ‘Cat among pigeons’ –
Fed Chairman Jerome Powell, who has signalled that the Fed will have to move more aggressively to counter decades-high US inflation, stated on Thursday that a half-point interest rate increase was “on the table” for next month’s meeting, sending Wall Street tanking.

“Further hawkish comments from the Federal Reserve Chair put another cat among the pigeons in a day of violent swings,” said Richard Hunter, head of markets at Interactive Investor.

“Quite apart from the widely expected 0.5 percent rate hike in May, this could also imply similar rises in subsequent months.”

That stoked worries the Fed could send the US economy’s pandemic recovery back into reverse.

“While the news should not have come as too much of a surprise, investors rushed for the exit as concerns of over-tightening and recession came back into focus,” said Hunter.

Fawad Razaqzada, market analyst with City Index and, said the Fed signalling had left sentiment downbeat and that “the damage has already been done.”

Nonetheless, Thomas Mathews, markets economist with Capital Economics, forecast that “this hiking cycle looks increasingly likely to be a sharp but short one in most cases, potentially ending as soon as next year.”

Sharp price rises are forcing major global central banks to hike interest rates, in turn curbing recovery from the pandemic.

Higher lending rates tend to weigh on companies’ share prices as they increase interest repayments on loans, while also further reducing consumers’ incomes.

In Asia earlier, Tokyo stocks slid more than 1.5 percent even as inflation data from Japan was in line with market expectations.

But Shanghai finished marginally higher as some Chinese Covid curbs were eased and the nation’s securities regulator pushed banks and insurers to buy more stocks to lift ailing equities.

– Key figures around 1400 GMT –
New York – Dow: DOWN 0.9 percent at 34,460.76

London – FTSE 100: DOWN 0.9 percent at 7,557.60 points

Paris – CAC 40: DOWN 1.8 percent at 6,593.71

Frankfurt – DAX: DOWN 1.9 percent at 14,227.58

EURO STOXX 50: DOWN 1.9 percent at 3,853.80

Tokyo – Nikkei 225: DOWN 1.6 percent at 27,105.26 (close)

Hong Kong – Hang Seng Index: DOWN 0.2 percent at 20,638.52 (close)

Shanghai – Composite: UP 0.2 percent at 3,086.92 (close)

Euro/dollar: DOWN at $1.0831 from $1.0834 late on Thursday

Dollar/yen: DOWN at 128.55 yen from 128.38 yen

Pound/dollar: DOWN at $1.2880 from $1.3030

Euro/pound: UP at 84.09 pence from 83.15 pence

Brent North Sea crude: DOWN 0.9 percent at $107.01 per barrel

West Texas Intermediate: DOWN 1.2 percent at $102.59 per barrel (AFP)


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