Stock markets teetered on Friday as the dollar surged higher against the euro and sterling as investors worried about rate hikes and a possible recession.
Both Paris and Frankfurt stocks ended the day with modest gains despite news of record-high euro-zone inflation bolstering expectations of a European Central Bank rate hike later this month.
The EU’s data agency Eurostat said annual consumer price inflation in the 19 countries using the euro rose to 8.6 percent in June, from a previous record of 8.1 percent in May.
“Today’s numbers underpin the European Central Bank’s intended decision to start raising interest rates at its next ECB Governing Council meeting in July,” noted economist Pushpin Singh of research group CEBR.
The ECB announced last month that it will conduct its first rate hike in more than a decade in July to fight inflation.
Eurostat added on Friday that core inflation – excluding volatile components like energy and food – had slowed to 3.7 percent from 3.8 percent, helping stocks settle as they head into the weekend break.
Wall Street’s main indices were marginally lower in late morning trading after recovering since the opening bell.
– ‘Another Big Leg Down’ –
Chris Beauchamp, chief market analyst at online trading platform IG, said there had been little buying interest at the start of the second half, although sharp falls in shares in the first half opened up an opportunity for gains.
New York’s S&P 500 index posted its worst first-half performance since 1970.
“There is a growing unease about the summer, particularly with a potentially very dismal (second quarter) earnings season just around the corner,” he said in a note to clients.
“It really looks like we have another big leg down before this bear market is over,” Beauchamp added.
As the war in Ukraine shows no end and energy costs remain high, borrowing costs are expected to continue to rise, pushing economies into recession.
Losses in global markets this week follow a rally last week, fueled by hopes that an economic slowdown or signs of a recession would prompt central banks to ease their efforts to tighten monetary policy.
But comments from top finance chiefs, including Federal Reserve Chair Jerome Powell, suggest they are willing to endure the pain of a contraction as long as they can rein in prices — those on either side of the world at the fastest Pace rising for 40 years Atlantic.
“Investors know that inflation is high and likely to rise further,” City Index analyst Fiona Cincotta told AFP.
“Instead, the market’s obsession is turning from inflation to recession fears. Given the sharp fall in share prices this week, a lot of the bad news is priced in for now ahead of next week,” she added.
The dollar, a safe-haven currency, rose 1 percent against the pound and the euro amid rising expectations of a recession.
“The US dollar should end the week stronger against most major currencies, approaching its strongest level since 2002 as ‘risky’ assets remain under pressure,” said Capital Economics economist James Reilly.
The euro slipped to a low of $1.0369 before bouncing back above $1.04. The pound hit a low of $1.1979.
Oil rallied on tight supplies despite ongoing recession concerns.
– Key figures at 1530 GMT –
New York – Dow: down 0.3 percent at 30,693.52 points
EURO STOXX 50: DOWN 0.2 percent at 3,448.31
London – FTSE 100: FLAT at 7,168.65 (close)
Frankfurt – DAX: up 0.2 percent at 12,813.03 (closing price)
Paris – CAC 40: up 0.1 percent at 5,931.06 (close)
Tokyo – Nikkei 225: down 1.7 percent at 25,935.62 (close)
Shanghai – Composite: down 0.3 percent at 3,387.64 (close)
Hong Kong – Hang Seng Index: Closed for public holiday
North Sea Brent crude: up 1.9 percent to $111.12 a barrel
West Texas Intermediate: up 2.2 percent to $108.08 a barrel
Euro/Dollar: DOWN at $1.0405 from $1.0484 on Thursday
Pound/dollar: DOWN at $1.2037 from $1.2178
Euro/pound: up to 86.46p from 86.09p
Dollar/Yen: DOWN at 135.19 yen from 135.72 yen
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