Stock markets around the world sank Thursday while the dollar rallied after
the Federal Reserve warned
US interest rates would go higher than previously
expected in its fight against decades-high inflation.
اضافة اعلان
Meanwhile the Bank of England warned that Britain faced a recession set to
last until mid-2024.
The Fed on Wednesday unveiled a fourth straight 0.75-percentage-point
increase as expected -- the sixth hike this year to cool rampant prices.
The dollar rose strongly against the pound despite the Bank of England also
delivering on Thursday a 0.75-percentage-point hike -- the largest in 33 years
-- to 3.0 percent, or the highest rate since 2008.
The pound fell by two percent against the dollar in afternoon trading before
clawing back some of its losses, which helped London's FTSE 100 share index
buck the trend and rise 0.6 percent. The index is loaded with multinationals
which earn most of their revenues in dollars and post higher profits in pounds
when the sterling exchange rate is low.
European Central Bank president Christine Lagarde flagged more interest rate
hikes on Thursday with comments that a "mild" eurozone recession was
looming but would not be enough to bring down record-high inflation.
Oil prices also fell heavily on Thursday as aggressive rate hikes increase
expectations of a global recession and softer demand for energy.
Hong Kong led stock market losses as the city's central bank hiked rates in
line with the Fed, owing to their policy link via the dollar peg.
Traders gave back a chunk of the previous two days' gains, which
came on the back of speculation China was planning to roll back some of its
painful zero-Covid policies.
Adding to the selling was confirmation from Beijing's health authority that
it intended to stick to the strategy.
- 'Some ways to go'
-
"Stocks fell... after the Federal Reserve raised benchmark interest
rates and warned that there was still some ways to go in its efforts to tame
inflation," said Mark Haefele, chief investment officer at UBS Global
Wealth Management.
Before the Fed announcement, stocks had rallied for more than a week on
speculation the US central bank would indicate that its rate tightening could
soon reach a peak as the world's biggest economy showed signs of slowing.
Yet Fed chief Jerome Powell poured cold water on hopes for a
"pivot" in policy, telling a news conference "incoming data
since our last meeting suggests that ultimate level of interest rates will be
higher than previously expected".
Briefing.com analyst Patrick O'Hare said for investors "the point
that registered was (Powell's) view that it is very premature to talk about
pausing the rate hikes".
Another key point was that "the Fed still has a ways to go to get the
policy rate to a restrictive level that is sufficient for getting inflation
back down to the 2.0 percent target," O'Hare noted.
Moreover, Powell indicated "that the Fed's terminal rate is apt to be
higher than previously expected and is likely to be held there longer than
previously expected," which upended previous market expectations.
Investors now expect Fed rates to top out at more than five percent,
compared with four percent previously.
The latest US data didn't help sentiment, with a key survey showing the services
sector grew less than expected in October as new orders eased and businesses
struggled to replenish their stocks.
Global equities have slumped this year on mounting fears that rising
borrowing costs will curtail consumer and business spending, sparking a global
recession.
- Key figures
around 1530 GMT -
New York - Dow: DOWN less than 0.1 percent at 32,126.58 points
EURO STOXX 50: DOWN 0.8 percent at 3,593.18
London - FTSE 100: UP 0.6 percent at 7,188.63 (close)
Frankfurt - DAX: DOWN 1.0 percent at 13,130.19 (close)
Paris - CAC 40: DOWN 0.5 percent at 6,243.28 (close)
Hong Kong - Hang Seng Index: DOWN 3.1 percent at 15,339.49 (close)
Shanghai - Composite: DOWN 0.2 percent at 2,997.81 (close)
Tokyo - Nikkei 225: Closed for a holiday
Pound/dollar: DOWN at $1.1180 from $1.1390 Wednesday
Euro/dollar: DOWN at $0.9754 from $0.9816
Dollar/yen: UP at 148.25 yen from 147.90 yen
Euro/pound: UP at 87.20 pence from 86.17 pence
Brent North Sea crude: DOWN 0.9 percent at $95.26 per barrel
West Texas Intermediate: DOWN 1.4 percent at $88.72 per barrel
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