LONDON: Global stock markets retreated Wednesday as traders digested stubbornly high UK inflation and mulled central bank moves in the fight against rampant consumer prices.
London’s benchmark FTSE 100 index slid after official data stoked expectations of another interest-rate hike from the Bank of England that could weigh further on the economy.
European shares rise ahead of more big US bank earnings
Britain’s annual CPI inflation rate slowed in March but held above 10 percent on soaring food prices, further fuelling a cost-of-living crisis in Britain.
In the eurozone, Frankfurt and Paris lapsed into negative territory after a largely downbeat session in Asia.
World oil prices shed two percent on fears the US Federal Reserve could also hike rates sharply again, in turn denting demand for crude.
Souring the mood
“Stubbornly high inflation soured the mood,” noted Russ Mould, investment director at stockbroker AJ Bell.
“News that UK CPI remains in double-digits will only strengthen the argument for the Bank of England to keep pushing up interest rates.”
The BoE has hiked rates 11 times since late 2021 in an unsuccessful bid to keep inflation close to a 2.0-percent target.
Higher borrowing costs have exacerbated the UK’s cost-of-living crisis, ramped up loans for businesses and consumers alike and dampened activity.
Later on Wednesday, markets will focus on US earnings from electric carmaker Tesla and bank Morgan Stanley.
Wall Street had flatlined on Tuesday, leaving traders to scrutinise mixed earnings from major US lenders.
Analyst Stephen Innes, of SPI Asset Management, said investors were also dwelling on the Fed’s outlook.
“Global traders have seemingly moved into defensive mode as the debate goes on whether the Fed is at the top of its hiking cycle,” Innes noted.
That debate remained far from settled, with some analysts warning that certain investors’ apparent confidence in coming rate cuts was misplaced.
China
Investors also mulled the health of the Chinese economy, with data Tuesday showing it expanded a forecast-busting 4.5 percent in January-March.
That was the first quarter it has been unencumbered by growth-sapping zero-Covid restrictions.
The jump was helped by a surge in retail sales in March, but while the readings were healthy, other figures on industrial output and fixed-asset investment came in below par, pointing to an uneven recovery.
Key figures around 1045 GMT
London - FTSE 100: DOWN 0.4 percent at 7,879.27 points
Frankfurt - DAX: DOWN 0.3 percent at 15,841.73
Paris - CAC 40: DOWN 0.1 percent at 7,522.93
EURO STOXX 50: DOWN 0.3 percent at 4,378.70
Tokyo - Nikkei 225: DOWN 0.2 percent at 28,606.76 (close)
Hong Kong - Hang Seng Index: DOWN 1.4 percent at 20,367.76 (close)
Shanghai - Composite: DOWN 0.7 percent at 3,370.13 (close)
New York - Dow: FLAT at 33,976.63 (close)
Euro/dollar: UP at $1.0955 from $1.0954 on Tuesday
Pound/dollar: UP at $1.2435 from $1.2425
Dollar/yen: UP at 134.92 yen from 134.12 yen
Euro/pound: DOWN at 88.10 pence from 88.31 pence
West Texas Intermediate: DOWN 2.0 percent at $79.25 per barrel
Brent North Sea crude: DOWN 2.0 percent at $83.12 per barrel
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