Global stocks slide on jitters over higher interest rates
Global stock markets dropped sharply Friday as the latest hawkish commentary from the Federal Reserve sent investors fleeing equities on worries over higher interest rates.
Frankfurt lost 2.5 per cent at the close and Paris ended off 2 per cent as investors shrugged off a survey showing the EU bloc's economic activity accelerated in April, while London lost 1.4 per cent on the session.
Wall Street followed the glum trend, with the Dow finishing off 2.8 per cent, or nearly 1,000 points, following an ugly session.
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 tanking.
"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 per cent 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.
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