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Stocks extend global selloff on US inflation gloom

AFP . London
15 Sep 2022 00:00:00 | Update: 15 Sep 2022 01:56:06

A man walks past a sign (C) showing the numbers on the Nikkei-225 stock market index, the New York Stock Exchange (L) and the value of the Japanese yen against the US dollar (R) along a street in Tokyo on Wednesday, after stocks opened down following a near four percent drop on Wall Street overnight– AFP Photo

Global equities sank further Wednesday as stronger-than-expected US inflation data sparked fears of a prolonged campaign of Federal Reserve interest rate hikes.

London was the heaviest faller in Europe after news that UK inflation slowed last month but held close to a 40-year high.

Asia tanked after Wall Street took its worst beating in weeks Tuesday on news of hot US inflation.

The dollar edged down in choppy trade, while oil prices were mixed Wednesday.

US inflation slowed slightly in August to 8.3 per cent, but this trumped market expectations of about eight per cent.

Caught up

European markets are caught up in the negative sentiment that has taken hold across global markets, said Victoria Scholar, head of investment at Interactive Investor.

Hotter-than-expected US inflation figures prompted heavy selling on Wall Street, she added.

Global consumer prices have soared for months, exacerbated by Russia’s invasion of Ukraine -- which has hiked energy and food costs -- as well as owing to supply chain strains and Covid lockdowns in China.

The Fed has already instituted two consecutive 75-basis-point hikes, and a third such move is widely expected at its meeting next week.

After the latest US inflation data, some investors are even predicting the next Fed hike could be a full percentage point.

Aggressive rate tightening by central banks worldwide is denting economic activity as consumers and businesses face higher loan repayments.

In the UK, inflation slowed to 9.9 per cent in August but remained almost in double digits.

The news boosted the pound on hopes of another interest rate hike next week from the Bank of England.

There has been a fresh bout of anxiety on financial markets amid worries that inflation is still proving to be a formidable opponent to take down, said Hargreaves Lansdown analyst Susannah Streeter.

In Asia, Tokyo led the region’s losses with the Nikkei plunging 2.8 per cent.

Hong Kong stocks closed down more than two per cent, with Chinese conglomerate Fosun hit hard by media reports that the group was under regulator scrutiny.