Global markets plunge on hawkish Fed

Global stock markets dropped sharply Friday after the Federal Reserve warned of a competitive tightening of economic policy to tame runaway inflation.

Frankfurt misplaced 2.5 percent on the near, and Paris ended off 2 percent as investors shrugged off a survey displaying the EU bloc’s financial interest improved in April at the same time as London lost 1.Four percent on the consultation.

Wall Street accompanied the glum trend as the Dow turned 1.6 percent in the crimson mid-consultation at the same time as the S&P index and the tech-rich Nasdaq each confirmed similar losses.

Helping to batter London was a sterling slump 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.

“(Price) risks are certainly more tilted to the upside, given the war in Ukraine and a potential embargo on Russian exports, but lockdowns in China and the risk of a Fed-driven economic slowdown are also significant,” observed Craig Erlam, Senior Market Analyst.

Fed Chairman Jerome Powell, who has signaled 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 tank.

“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, the market analyst with City Index and FOREX.com, said the Fed signaling 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 rate rises are forcing important international critical banks to hike hobby prices, in turn curbing restoration from the pandemic.

Higher lending charges have a tendency to weigh on groups’ proportion charges as they grow interest repayments on loans, whilst also similarly decreasing clients’ incomes.

In Asia in advance, Tokyo shares slid more than 1.5% even as inflation statistics from Japan became consistent with marketplace expectations.

But Shanghai completed marginally higher as some Chinese Covid curbs were eased and the nation’s securities regulator driven banks and insurers to shop for more shares to boost ill equities.

New York – Dow: DOWN 1.6 percent at 34,217.17 points

London – FTSE 100: DOWN 1.4 percent at 7,521.68 (close)

Paris – CAC 40: DOWN 2.0 percent at 6,581.42 (close)

Frankfurt – DAX: DOWN 2.5 percent at 14,142.09 (close)

EURO STOXX 50: DOWN 2.4 percent at 3,840.01

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 $1.0788 from $1.0834 late on Thursday

Dollar/yen: UP at 128.77 yen from 128.38 yen

Pound/dollar: DOWN at $1.2851 from $1.3030

Euro/pound: UP at 83.94 pence from 83.15 pence

Brent North Sea crude: DOWN 1.7 percent at $106.15 per barrel

West Texas Intermediate: DOWN 1.6 percent at $102.17 per barrel