Global stocks fell for a third day on Friday after the US Federal Reserve and other central banks raised interest rates to control persistent inflation, raising fears of a possible global recession.
London and Frankfurt opened lower. Shanghai, Hong Kong and Seoul declined. Oil prices fell by more than $1 a barrel. Japanese markets are closed for a holiday.
Wall Street futures fell after interest rates were raised on Thursday by the central banks of Britain, Switzerland, Turkey and the Philippines. The Fed raised its key interest rate on Wednesday for the fifth time this year and indicated more hikes are on the way.
“Global stocks are struggling as the world anticipates that higher prices will lead to an urgent and possibly severe global recession,” Edward Moya of OANDA said in a report.
In early trading, the FTSE 100 in London lost 0.6% to 7,127.70 and the DAX in Frankfurt fell 0.3% to 12,490.55. The CAC 40 in Paris was down 0.2% at 5905.20.
On Wall Street, S&P 500 and Dow Jones Industrial Average futures were down 0.4%.
On Thursday, the S&P 500 lost 0.8%. The Dow Jones Industrial Average fell 0.4 percent and the Nasdaq Composite fell 1.4 percent.
In Asia, the Shanghai Composite fell 0.7% to 3088.36 and Hong Kong’s Hang Seng fell 1.1% to 17953.50. Kospi in Seoul fell 1.8% to 2290.00.
Sydney’s S&P-ASX 200 fell 1.9% to 6574.70 and India’s Sensex fell 1.5% to 58231.49. New Zealand and Southeast Asia markets fell.
Also on Friday, the Central Bank of Vietnam raised its key lending rate by a full percentage point, surprising forecasters. The Central Bank of Vietnam appears to be trying to cool inflation while discouraging capital outflow in search of higher interest rates abroad.
Investors worry that central banks may be willing to endure a painful recession to control prices.
Some indications are that the US economy is cooling as the Federal Reserve supports it to backtrack on plans to raise interest rates further. But President Jerome Powell said interest rates on Wednesday will remain high for an extended period if needed to bring inflation back to its 2% target.
US consumer price inflation eased to 8.3% in August from the previous month’s peak of 9.1%. But core inflation, which strips out volatile food and energy prices to give a clearer picture of the trend, rose to 0.6% from the previous month, up from 0.3% in July. This indicates that the pressure on prices to rise remains strong.
The Federal Reserve on Wednesday raised the benchmark interest rate, which affects many consumer and business loans, to a range of 3% to 3.25%. It released forecasts showing it expects the record rate to be 4.4% by the end of the year, a full point higher than forecast in June.
Traders are also looking forward to the quarterly financial results from major companies.
In energy markets, benchmark US crude lost $1.23 to $82.26 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 55 cents to $83.49 on Thursday. Brent crude, used in global oil pricing, fell $1.24 to $88.29 a barrel in London. It rose 63 cents in the previous session to $90.46.
The dollar fell to 142.39 yen from 142.49 yen on Thursday. The euro fell to 97.63 cents from 98.31 cents.