Global stocks plunge on jitters over higher interest rates

Global stock markets dropped sharply Friday as the trendy hawkish commentary from the Federal Reserve sent traders fleeing equities on issues over better hobby prices.

Frankfurt misplaced 2.5 percent on the close and Paris ended off 2 percent as traders shrugged off a survey displaying the EU bloc’s economic pastime elevated in April, at the same time as London lost 1.4 percent on the consultation.

Wall Street followed the glum fashion, with the Dow finishing off 2.8 percent, or almost 1,000 points, following an unsightly consultation.

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 fell on demand fears arising from rising interest rates in the United States and 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 tanks.

“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.

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 main international primary banks to hike interest quotes, in turn curtailing recuperation from the pandemic.

Higher lending fees generally tend to weigh on groups’ percentage fees as they grow interest repayments on loans, while also similarly reducing consumers’ earnings.

In Asia earlier, Tokyo stocks slid by greater than 1.5 percentage while inflation information from Japan was in keeping with market expectancies.

But Shanghai finished marginally better as a few Chinese Covid curbs have been eased and the country’s securities regulator driven banks and insurers to shop for greater shares to raise sick equities.

New York – Dow: DOWN 2.8 percent at 33,811.40 (close)

New York – S&P 500: DOWN 2.8 percent at 4,271.78 (close)

New York – Nasdaq: DOWN 2.6 percent at 12,839.29 (close)

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 2.2 percent at 3,840.01 (close)

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 $1.0801 from $1.0834 late on Thursday

Dollar/yen: UP at 128.51 yen from 128.38 yen

Pound/dollar: DOWN at $1.2834 from $1.3030

Euro/pound: UP at 84.14 pence from 83.15 pence

Brent North Sea crude: DOWN 1.6 percent at $106.65 per barrel

West Texas Intermediate: DOWN 1.7 percent at $102.07 per barrel