Recession Fears Haunt Markets

London, (UrduPoint / Pakistan Point News - 29th Jun, 2022 ) :Asian and European stock markets nursed losses Wednesday on resurgent fears that sharp interest rate hikes, aimed at tackling runaway inflation, could spark recession, dealers said.

The losses came after a gloomy US consumer confidence report had sent Wall Street tumbling on Tuesday.

US stocks stabilised on Wednesday, with the Dow adding 0.2 percent while the S&P 500 and the tech-heavy Nasdaq dipped slightly, as fresh data showed consumers pulling back on spending.

European sentiment was rocked also by data showing Spanish inflation rocketed to a 37-year peak of 10.2 percent in June on rising energy and food prices.

The news sent the Madrid stock market down 1.6 percent, with Frankfurt falling 1.7 percent. Paris gave up 0.9 percent and London shed 0.2 percent.

"So much for the big stock market comeback. Another day, another sea of red on the market," said AJ Bell investment director Russ Mould.

"It does look like we are still in the first phase of this bear market, where indices are prepared to drop on the slightest bit of bad news, and any rally is short-lived," said Chris Beauchamp at online trading platform IG.

The selloff followed more than a week of global gains caused by hopes that any signs of contraction could give central banks room to ease up on their pace of monetary tightening.

But New York stocks tanked Tuesday on data showing confidence among US consumers -- a key driver of the world's top economy -- had fallen to its lowest level in more than a year.

The data re-ignited stubborn worries over the strength of the world economy, and eclipsed news of a surprise move by China to slash the quarantine period for incoming travellers.

That had raised hopes for further relaxations that can allow the country's giant economy to recover more quickly.

Updated first quarter US GDP data released Wednesday chopped the personal consumption growth figure to 1.8 percent, from 3.1 percent, in an indication that even at the beginning of the year consumers were feeling crimped by rising prices.

- 'Down the drain' - "With signs that consumer confidence is seeping away, worries that global growth will go down the drain have returned to rattle financial markets," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"Covid restrictions may have eased for international travellers to China as infections rates slow, but one global problem is being replaced by another -- fear that recessions are looming around the world." Fed officials on Tuesday tried to play down the chances of a recession, expressing hope of a soft landing.

City Index analyst Fawad Razaqzada said there is a threat of high inflation and recession, a phenomenon economists call stagflation.

"That is where the global economy is headed, and central banks won't be able to do much about it," he said in a note to clients.

"If they fasten their belts too tightly, this will hit GDP, while if they loosen their belts again, this will only fuel inflationary pressures further." Oil prices advanced on expectations of demand growth as China lifts Covid restrictions and owing to tight supplies following bans on Russian imports.

Observers warned that G7 plans for a price cap on Russian crude was unlikely to have a massive impact on benchmark values.

- Key figures at around 1530 GMT - New York - Dow: UP 0.2 percent at 31,008.81 points EURO STOXX 50: DOWN 1.0 percent at 3,512.29 London - FTSE 100: DOWN 0.2 percent at 7,312.32 (close) Frankfurt - DAX: DOWN 1.7 percent at 13,003.35 (close) Paris - CAC 40: DOWN 0.9 percent at 6,031.48 (close) Tokyo - Nikkei 225: DOWN 0.9 percent at 26,804.60 (close) Hong Kong - Hang Seng Index: DOWN 1.9 percent at 21,996.89 (close) Shanghai - Composite: DOWN 1.4 percent at 3,361.52 (close) Brent North Sea crude: UP 0.3 percent at $118.29 per barrel West Texas Intermediate: UP 0.3 percent at $112.12 per barrel Euro/dollar: DOWN at $1.0468 from $1.0519 Tuesday Pound/dollar: DOWN at $1.2125 from $1.2184Euro/pound: UP at 86.35 pence from 86.33 penceDollar/yen: UP at 136.73 Yen from 136.14 yen