US inflation gloom casts dark shadow over markets / Photo: © AFP
US inflation gloom casts dark shadow over markets
Global equities sank further Wednesday as stronger-than-expected US inflation data sparked fears of a prolonged campaign of Federal Reserve interest rate hikes.
London was the heaviest faller in Europe after news that UK inflation slowed last month but held close to a 40-year high.
Asia tanked after Wall Street took its worst beating in weeks Tuesday on news of hot US inflation.
US stocks opened to the upside, but then dipped into the red.
The dollar edged down in choppy trade, while oil prices climbed.
US inflation slowed slightly in August to 8.3 percent on an annual measure, but this trumped market expectations of about eight percent. Prices actually rose on a monthly comparison.
- 'Caught up' -
European markets are "caught up in the negative sentiment that has taken hold across global markets," said Victoria Scholar, head of investment at Interactive Investor.
"Hotter-than-expected US inflation figures prompted heavy selling on Wall Street," she added.
Global consumer prices have soared for months, exacerbated by Russia's invasion of Ukraine -- which has hiked energy and food costs -- as well as owing to supply chain strains and Covid lockdowns in China.
The Fed has already instituted two consecutive 75-basis-point hikes, and a third such move is widely expected at its meeting next week.
After the latest US inflation data, some investors are even predicting the next Fed hike could be a full percentage point.
Aggressive rate tightening by central banks worldwide is denting economic activity as consumers and businesses face higher loan repayments.
Investors "still appear to be in a state of shock, trying to process how high the Fed will go with its policy rate and how low the economy and earnings growth will go as a result of the restrictive policy," said market analyst Patrick O'Hare at Briefing.com.
In the UK, inflation slowed to 9.9 percent in August but remained almost in double digits.
The news boosted the pound on hopes of another interest rate hike next week from the Bank of England.
"There has been a fresh bout of anxiety on financial markets amid worries that inflation is still proving to be a formidable opponent to take down," said Hargreaves Lansdown analyst Susannah Streeter.
In Asia, Tokyo led the region's losses with the Nikkei plunging 2.8 percent.
Hong Kong stocks closed down more than two percent, with Chinese conglomerate Fosun hit hard by media reports that the group was under regulatory scrutiny.
- Key figures at around 1330 GMT -
London - FTSE 100: DOWN 1.5 percent at 7,278.31 points
Frankfurt - DAX: DOWN 1.3 percent at 13,019.02
Paris - CAC 40: DOWN 0.8 percent at 6,198.00
EURO STOXX 50: DOWN 0.8 percent at 3,557.85
New York - Dow: DOWN less than 0.1 percent at 31,096.44
Tokyo - Nikkei 225: DOWN 2.8 percent at 28,818.62 (close)
Hong Kong - Hang Seng Index: DOWN 2.5 percent at 18,847.10 (close)
Shanghai - Composite: DOWN 0.8 percent at 3,237.54 (close)
Euro/dollar: UP at $0.9992 from $0.9970 late Tuesday
Pound/dollar: UP at $1.1557 from $1.1493
Euro/pound: DOWN at 86.38 pence from 86.75 pence
Dollar/yen: DOWN at 142.82 yen from 144.58 yen
Brent North Sea crude: UP 1.3 percent at $94.38 per barrel
West Texas Intermediate: UP 1.5 percent at $88.62 per barrel
burs-rl/lth
L.Graham--TNT
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