LONDON — Asian and
European stock markets
mostly nursed losses Wednesday on resurgent fear that sharp interest rate
hikes, aimed at tackling runaway inflation, could spark recession, dealers
said.
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The losses came after a gloomy US consumer
confidence report had sent Wall Street tumbling on Tuesday.
US stocks stabilized on Wednesday, with the Dow
adding 0.3 percent while the tech-heavy Nasdaq dipped slightly.
European sentiment was rocked also by data showing
Spanish inflation rocketed to a 37-year peak of 10.2 percent in June on rising
energy and food prices.
The news sent the Madrid stock market down 1.3
percent, with Frankfurt showing a similar loss. Paris shed 0.8 percent.
London managed to break into the green and show a small gain.
“So much for the big stock market comeback. Another
day, another sea of red on the market,” said AJ Bell investment director Russ
Mould.
The selloff followed more than a week of global
gains caused by hopes that any signs of contraction could give central banks
room to ease up on their pace of monetary tightening.
But New York stocks tanked Tuesday on data showing
confidence among US consumers — a key driver of the world’s top economy — had
fallen to its lowest level in more than a year.
The data reignited stubborn worries over the
strength of the world economy, and eclipsed news of a surprise move by
China to
slash the quarantine period for incoming travelers.
That had raised hopes for further relaxations that
can allow the country’s giant economy to recover more quickly.
‘Down the drain’
“With signs that consumer
confidence is seeping away, worries that global growth will go down the drain
have returned to rattle financial markets,” said Susannah Streeter, senior
investment and markets analyst at Hargreaves Lansdown.
“
COVID restrictions
may have eased for international travelers to China as infections rates slow,
but one global problem is being replaced by another — fear that recessions are
looming around the world.”
Fed officials on Tuesday tried to play down the
chances of a recession, expressing hope of a soft landing.
City Index analyst Fawad Razaqzada said there is a
threat of high inflation and recession, a phenomenon economists call
stagflation.
“That is where the global economy is headed, and
central banks won’t be able to do much about it,” he said in a note to clients.
“If they fasten their belts too tightly, this will
hit
GDP, while if they loosen their belts again, this will only fuel inflationary
pressures further.”
Oil prices advanced on expectations of demand growth
as China lifts COVID restrictions and owing to tight supplies following bans on
Russian imports.
Observers warned that
G7 plans for a price cap on
Russian crude was unlikely to have a massive impact on benchmark values.
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