Global stocks fall on inflation, central bank moves

NEW YORK (Reuters) – Global stock markets tumbled on Thursday as U.S. inflation hit nearly 8%, making the Federal Reserve almost certain to raise interest rates next week, and the European Central Bank rushing to end its mega deals. stimulus programme.

Data showed that US consumer inflation reached 7.9% at an annual rate in February, the largest annual increase in 40 years.

Wall Street backed down on the data because while markets expect the central bank to raise the federal funds rate target by 25 basis points at the conclusion of next week’s monetary policy meeting, CPI data suggested the Federal Open Market Committee could move “more aggressively” to curb inflation. . , as promised by Federal Reserve Chairman Jerome Powell last week. Read more

The European Central Bank said earlier in the session that it will stop pumping money into financial markets this summer, paving the way for higher interest rates as soaring inflation outweighs concerns about the fallout from Russia’s invasion of Ukraine. Read more

Talks between Ukraine and Russia on Thursday failed to bring any truce to a conflict that has trapped hundreds of thousands of civilians in Ukrainian cities where they are sheltering amid air strikes and Russian bombing. Read more

The euro pared its overnight gains after the European Central Bank’s announcement, and the dollar boosted as a result of the US inflation report. The 10-year US Treasury yield rose above 2% for the first time in two weeks. Read more

Some inflation could be good for stock prices, said Melissa Brown, managing director of applied research at Contigo, but central banks have had their go at managing inflation that is at multi-decade highs.

“We’ve reached that tipping point between good inflation and bad inflation. It’s driving volatility higher, and higher volatility usually drives investors away,” Brown said.

“Sentiment is very uncertain. Now that we’re where we are, can (central bankers) walk that fine line between managing inflation and not pushing us into a recession?”

MSCI’s benchmark for stocks worldwide (.MIWD00000PUS) It was down 0.19% at 5:12 PM ET (2212 GMT).

Dow Jones Industrial Average (.DJI) The index fell 112.18 points, or 0.34%, to 33,174.07 points, the Standard & Poor’s 500 (.SPX) It lost 18.36 points, or 0.43%, to 4259.52 points, and the Nasdaq Composite (nineteenth) It fell 125.58 points, or 0.95%, to 13,129.96 points.

Pan-European STOXX 600 Index (.stoxx) He lost 1.69%.

The dollar index rose 0.554 percent, with the euro advancing 0.04 percent to $1.0987.

The yield on the 10-year Treasury rose 6.3 basis points to 2.011% after hitting 2.021%, its highest level since February 17.

With sharp increases in energy and other commodity markets due to the war in Ukraine, it will likely take longer to reach peak inflation, said Vineta Dimitrova, chief US economist at Ned Davis Research.

“This means higher inflation for a longer period and a left policy path for the Fed going forward,” Dimitrova said, adding that she expects the Fed to go ahead with a 25 basis point rate hike next week.

“With all the geopolitical uncertainty and market volatility out there, the Fed doesn’t want to add to the uncertainty.”

Oil fell in volatile trade after the United Arab Emirates retracted comments that OPEC and its allies may increase production to help plug the gap in exports from Russia.

US crude oil futures settled at $106.02 a barrel, down 2.47%, while international benchmark Brent crude settled at $109.33, down 1.63%.

A draft declaration on Thursday showed that European Union leaders will gradually stop buying Russian oil, gas and coal, as the union seeks to reduce its dependence on Russian energy sources, following a ban from the United States. Read more

(Reporting by Elizabeth Dilts Marshall in New York with additional reporting by Tom Wilson.) Editing by Chizu Nomiyama and Lisa Shumaker

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