Wall Street and global stock markets fell Tuesday as investors worried about weaker economic growth in the wake of central bank raising interest rates to lower inflation.
London and Frankfurt opened lower. Shanghai, Tokyo, and Sydney all declined. The oil prices fell.
The U.S. Federal Reserve increased its key lending rate by 1% last week, and the European Central Bank indicated that more rate increases are on the horizon. Markets have been sliding since then. Investor fears that central bankers may be willing to create a recession in order to combat inflation, which is currently at its multi-decade peak, fuelled investor concerns.
Anderson Alves, of ActivTrades stated in a report that “the tone in the markets reflects a cloudy view for the global economy.”
The FTSE London dropped 0.7% to 7,311.82 in early trading. Frankfurt’s DAX lost 0.9% at 13,812.03 while Paris’s CAC 40 fell 1.1% to 6,403.95.
Wall Street saw a 0.6% decline in the outlook for S&P 500, which is the benchmark index. The Dow Jones Industrial Average suffered a 0.4% decline.
The S&P 500 plunged 0.9% Monday as technology stocks, retailers, and communications companies retreated.
After the Fed last week said that rates may need to remain higher than originally forecast, the index has been sliding. The index is currently down 20% for the year, with just two weeks remaining in 2022.
Dow Jones Industrial Average lost 0.5%. Nasdaq lost 1.5%.
The Nikkei225 in Tokyo fell 2.5% to 26,568.03 following Japan’s central banking, which decided not to join the Fed or other central banks when it raised rates. This will enable market interest rates edge higher.
After the World Bank reduced its projection of China’s economic growth to 2.7%, from 4.3% in June, the Shanghai Composite Index fell 1.1% to 3 073.76. To combat COVID-19, the bank mentioned repeated city shutdowns.
The Hang Seng (Hong Kong) fell 1.3% to 19,094.80, while the Kospi (Seoul) lost 0.8% at 2,333.29.
The S&P 200 in Sydney fell 1.5% at 7,024.03, while the Sensex India gained 0.8% at 61,806.19. New Zealand’s and Southeast Asian markets fell.
In its seventh annual increase, the Fed increased its short-term lending rates by one-half percent last week. Investor hopes that the U.S. central banking would ease down on rate increases were dashed by data suggesting economic activity is cooling.
Federal funds rates are at an all-time high of between 4.25% and 4.5%, which is a record for the past 15 years. It is expected that the Fed will see it range from 5% to 5.25 percent by 2023. It is not expected that the Fed will reduce its rate before 2024.
For an update on inflation, investors were watching the U.S. Economic Reports this week. Although it has fallen from 9.1% to June’s peak of 7.1%, the November reading was 7.1%.
On Wednesday, the National Association of Realtors reported November home sales. The Conference Board also releases Wednesday’s consumer confidence report.
The U.S. government reports November consumer spending on Friday. As an indicator of inflation, the Fed will be watching this report.
The benchmark U.S. crude oil lost 55 cents per barrel to $74.83 in electronic trading at the New York Mercantile Exchange. Brent crude oil, which is the basis price for international oil trading fell 65c to $79.15 per barrel in London.
From Monday’s 139.99 yen, the dollar fell to 132.41 Japanese yen. From $1.0604, the euro rose to $1.0619.
