Bangkok: Shares in Europe and Asia fell on Friday as central banks prepared for more interest rate hikes, according to the Associated Press.
The fear is that the Federal Reserve and other central banks could bring on a recession by raising rates too high to get inflation under control.
Oil prices fell nearly $2 a barrel and US futures turned sharply lower.
The latest wave of selling comes after central banks in Europe raised interest rates a day after the US Federal Reserve raised its key rate again, stressing that interest rates need to be lowered to reduce inflation. There will be a need to go further than previously expected.
Like the Fed, central bank officials in Europe said inflation has not yet recovered and more rate hikes are on the way. The European Central Bank, the Bank of England, and the central bank of Switzerland pushed through half-point hikes on Thursday.
“We are in for a long game,” Christine Lagarde, president of the European Central Bank, told a news conference on Thursday.
Early Friday, Germany’s DAX was down 0.9 percent at 13,864.37 and Britain’s FTSE 100 was down 1 percent at 7,352.86. In Paris, the CAC 40 also fell 1 percent to 6,458.10.
The future for the S&P 500 was 1 percent lower and for the Dow Jones Industrial Average declined 0.9 percent.
On Thursday, the S&P 500 fell 2.5 percent, the tech-heavy Nasdaq Composite lost 3.2 percent and the Dow rebounded 2.2 percent.
China’s move to ease COVID restrictions has raised hopes of an end to massive disruptions from the lockdown and other strict measures to contain the infection. But signs of a rapidly rising number of cases have raised uncertainty, with some worried about the possibility that the pandemic will continue to drag on the economy.
Hong Kong’s Hang Seng rose 0.4 percent to close at 19,450.67, while the Shanghai Composite index fell less than 1 point to 3,167.86.
Tokyo’s Nikkei 225 fell 1.9 percent to 27,527.12 after a survey of manufacturers showed a further deterioration in the outlook for manufacturers.
The preliminary reading of the factory purchasing managers’ index builds to 48.8, down from November’s 49.0, on a 0-100 scale where 50 marks the break between contraction and expansion.
This is in line with the downbeat production forecasts issued by firms. The demand slowdown was the main reason, Capital Economics said in a report.
The Kospi fell less than a point to 2,360.02 in Seoul, while Australia’s S&P/ASX 200 dropped 0.8 percent to 7,148.70.
Shares in Taiwan fell 1.4 percent and the SET in Bangkok lost 0.1 percent. Mumbai fell 1.4 per cent.
The Fed is slowing the pace of its rate hikes, but has indicated that rates are expected to be higher in the coming years than previously thought. That has disappointed investors who had hoped recent signs that inflation was easing would persuade the Fed to ease on the brakes it has applied to the US economy.
The federal funds rate is in the range of 4.25 percent to 4.5 percent, the highest level in 15 years. Fed policymakers expect the central bank rate to reach a range of 5 percent to 5.25 percent by the end of 2023. His forecast does not call for a rate cut before 2024.
The central bank is fighting to tame inflation at the same time pockets of the economy remain strong, including employment and consumer spending. This has made it difficult to rein in the high prices of everything from food to clothing.
On Thursday, the government reported that the number of Americans applying for unemployment benefits fell last week, a sign that the labor market remains strong. Meanwhile, another report showed that retail sales declined in November. That pullback followed a sharp increase in October.
In other Friday trading, benchmark US crude oil gained $1.93 to $74.18 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, it fell by $1.17 to $76.11 per barrel.
Brent crude, the basis for pricing for international trade, rose $1.92 to $79.27 a barrel.
The dollar fell to 137.11 Japanese yen from 137.81 yen late Thursday. The euro fell from $1.0627 to $1.0618.