Global stock markets sink under global recession fears

Beijing: Global stock markets fell Monday as investors wrestled with fears the Federal Reserve and European central banks might be willing to cause a recession to crush inflation.

Frankfurt, Shanghai, Tokyo and Wall Street futures declined. London rose. Oil prices advanced.

Wall Street fell Friday after the Fed raised its forecast of how long interest rates have to stay elevated to cool inflation that is near a four-decade high. The European Central Bank warned more rate hikes are coming.

That “hawkish rhetoric” indicates “mounting pipeline risks of a global recession,” said Tan Boon Heng of Mizuho Bank in a report.

In early trading, the DAX in Frankfurt lost 0.7 per cent to 13,893.07 and the CAC 40 in Paris fell 1.1 per cent to 6,452.63. The FTSE 100 in London gained 0.3 per cent to 7,356.32.

On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones Industrial Average were off less than 0.1 per cent.

On Friday, the S&P 500 index lost 1.1 per cent and turned in its second weekly decline. It is down about 19% this year. The Dow dropped 0.8 per cent and the Nasdaq composite lost 1 per cent.

In Asia, the Shanghai Composite Index lost 1.5 per cent to 3,118.95 despite the ruling Communist Party announcing Friday it will try to reverse China’s economic slump by stimulating domestic consumption and the real estate market.

The Nikkei 225 in Tokyo sank 1.1 per cent to 27,226.12 and the Hang Seng in Hong Kong shed 0.5 per cent to 19,359.03.

The Kospi in Seoul retreated 0.6 per cent to 2,346.49 and Sydney’s S&P-ASX 200 was 0.2 per cent lower at 7,133.90.

India’s Sensex lost 0.8 per cent to 61,337.81. Singapore and Bangkok advanced while New Zealand and Jakarta declined.

U.S. consumer inflation has eased to 7.1 per cent over a year earlier in November from June’s 9.1% high but still is painfully high.

The Fed on Wednesday raised its benchmark short-term lending rate by one-half percentage point for its seventh hike this year. That dashed hopes the US central bank might ease off increases due to signs inflation and economic activity are cooling.

The federal funds rate stands at a 15-year high of 4.25 per cent to 4.5 per cent. The Fed forecast that will reach a range of 5 per cent to 5.25 per cent by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

In energy markets, US benchmark crude rose 55 cents to USD 74.84 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell USD 1.82 on Friday to USD 74.29. Brent crude, the price basis for international oil trading, gained 57 cents to USD 79.61 per barrel in London. It lost USD 2.17 the previous session to USD 79.04.