Hike rates

Stocks fall as central bank rates rise

Stock markets fell on Thursday as more central banks raised interest rates in a bid to rein in runaway inflation, actions that raised fears they could trigger recessions.

A day after the largest interest rate hike in the United States (US) by the Federal Reserve (Fed) in nearly 30 years, the Bank of England (BoE) has raised borrowing costs to their highest high level since the 2009 financial crisis.

The BoE raised its rate a quarter of a point to 1.25%, its fifth consecutive increase, but it was lower than the Fed’s more aggressive 0.75 percentage point hike.

Adding to the sense of urgency, the Swiss National Bank (SNB) surprised markets by unexpectedly raising rates for the first time since 2007.

The European Central Bank (ECB) plans to raise rates next month for the first time in a decade.

“European stock markets are collapsing on recession fears as central banks act aggressively to rein in inflation,” City Index analyst Fiona Cincotta told AFP.

“While the Fed’s decision was priced in, the SNB hike was a shock that caught investors off guard. Harder and faster rate hikes from central banks mean a recession will be hard to avoid.”

European stock markets closed at their lowest level in three months, with London and Frankfurt losing more than 3% and Paris falling 2.4%.

Wall Street, which had rebounded from the Fed’s rate hike on Wednesday, fell sharply on Thursday.

The tech-heavy Nasdaq fell 4% in midday trading, while the broad-based S&P 500 was down 3.2% and the Dow Jones fell 2.4%.

Asian markets mostly closed lower.

Markets have been battered this year as investors worry about consumer prices, which soared when Russia’s invasion of Ukraine sent energy and food prices skyrocketing food.

This has intensified fears that the global economy, which is still recovering from the deadly COVID pandemic, could resume a long downturn.

Although rate hikes are needed to bring inflation down, investors fear that overly aggressive central bank action could further hurt the global economic recovery and even trigger recessions.

“Stock markets are experiencing another day of crisis on Thursday as central banks continue to signal their willingness to sacrifice the economy in order to control inflation,” said Craig Erlam, analyst at online trading platform OANDA.

Oil prices, meanwhile, stabilized after losses on demand worries caused by China’s new COVID containment measures and news of the US production surge.

Key figures around 2:00 p.m. GMT

New York – Dow Jones: DOWN 2.4% to 29,935.59 points

London – FTSE 100: 3.1% down to 7,044.98 (close)

Frankfurt – DAX: DOWN 3.3% at 13,038.49 (closing)

Paris – CAC 40: DOWN 2.4% to 5,886.24 (closing)

EURO STOXX 50: DOWN 3.0% to 3,427.91

Tokyo – Nikkei 225: 0.4% higher at 26,431.20 (close)

Hong Kong – Hang Seng Index: DOWN 2.2% to 20,845.53 (closing)

Shanghai – Composite: DOWN 0.6% to 3,285.38 (close)

Euro/dollar: UP at 1.0495 USD against 1.0444 USD on Wednesday evening

Pound/dollar: UP at 1.2280 USD against 1.2180 USD

Euro/pound: DOWN to 85.48 pence against 85.75 pence

Dollar/yen: FALL to 132.60 yen against 133.84 yen

North Sea Brent Crude: DOWN 0.3% to US$118.13 a barrel

West Texas Intermediate: 0.2% higher to US$115.56