Stocks tumble worldwide as US inflation soars

US consumer price data later in the day will be closely watched for an idea about the Federal Reserve's plans for monetary policy
AFP

Stock markets plunged deeper into the red on Friday after data showed US inflation soared to the highest level in more than 40 years in May, far outpacing analysts’ expectations.

In Europe, all of the major stock indices ended the week sharply lower.

Paris’s blue-chip CAC 40 lost 2.7 percent on Friday, Frankfurt’s DAX index was down 3.1 percent, Milan’s FTSE MIB shed 5.1 percent, Madrid’s IBEX tumbled 3.7 percent and London’s FTSE dropped by 2.1 percent.

On Wall Street, stocks also were deep in negative territory after US government data showed inflation reached 8.6 percent in the 12 months ended in May, the steepest rise in consumer prices since December 1981, on the back of surging energy and food prices.

The data had been eagerly anticipated as investors hungrily look for clues as to the direction of US interest rates at next week’s meeting of the Federal Reserve.

“The market had expected that we’d see at least a plateauing or flattening out of inflation but it seems that inflation pressures continue to build and we’ve seen a further broadening of price pressures,” said Shaun Osborne, a foreign exchange specialist at Scotiabank.

“So it seems more entrenched, stickier kind of price or inflation situation.”

Osborne said the report will encourage investor debate on whether the US central bank will shift to a 75 basis point interest rate hike next week instead of the planned half-point increase.

But Osborne believes the Fed will go with its original plan, considering a bigger increase would look “panicky.”

Adding to the unease was news that officials in China had once again locked down millions of people for Covid testing owing to another flare-up in cases, dealing a blow to hopes for an economic reopening.

“Warning signs about the economy are emerging as weekly (US) jobless claims are starting to rise, China’s Covid situation will prove troublesome for supply chains over the next couple of quarters, and as inflationary pressures broaden and show no sign of easing,” said Edward Moya, analyst at OANDA trading group.

“It seems reductions in global growth forecasts will become a steady theme over the next few months and that should complicate how much more tightening we see from central banks,” he said.

The World Bank and Organization for Economic Co-operation and Development this week each lowered their global economic growth forecasts for 2022.

Key figures at around 2100 GMT

New York – Dow: DOWN 2.7 percent at 31,392.79 (close)

New York – S&P 500: DOWN 2.9 percent at 3,900.86 (close)

New York – Nasdaq: DOWN 3.5 percent at 11,340.02 (close)

London – FTSE 100: DOWN 2.1 percent at 7,317.52 (close)

Frankfurt – DAX: DOWN 3.1 percent at 13,761.83 (close)

Paris – CAC 40: DOWN 2.7 percent at 6,187.23 (close)

EURO STOXX 50: DOWN 3.4 percent at 3,599.20 (close)

Tokyo – Nikkei 225: DOWN 1.5 percent at 27,824.29 (close)

Hong Kong – Hang Seng Index: DOWN 0.3 percent at 21,806.18 (close)

Shanghai – Composite: UP 1.4 percent at 3,284.83 (close)

Euro/dollar: DOWN at $1.0526 from $1.0617 late Thursday

Euro/pound: UP at 85.39 pence from 84.98 pence

Dollar/yen: UP at 134.42 yen from 134.36 yen

Pound/dollar: DOWN at $1.2309 from $1.2493

Brent North Sea crude: DOWN 0.9 percent at $122.01 per barrel

West Texas Intermediate: DOWN 0.7 percent at $120.67 per barrel

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