Wall Street headed for another day of losses early Friday after interest rate increases by the Federal Reserve and other central banks sparked fears of a possible global recession and pushed oil prices to their lowest since the opening days of 2022.
Dow Jones Industrial Average futures were down 1.1% and S&P 500 futures were down 1.2%. Barring a sharp swing, major US indices are poised to end the week with losses for the fourth time in five weeks.
Oil prices fell 3 percent, threatening to fall below $80 a barrel for the first time since early January.
The central banks of Britain, Switzerland, Turkey and the Philippines raised interest rates after the Federal Reserve raised its key interest rate on Wednesday for the fifth time this year and indicated more increases 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.
The new British government on Friday announced a comprehensive plan for tax cuts that it said would be financed by borrowing and revenue from projected growth, sending the pound below $1.12 for the first time since 1985.
Economists have expressed concern that government policies will lead to a sharp increase in borrowing, undermining confidence in the British economy.
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.
At midday in Europe, the FTSE 100 in London is down 2.1%, the DAX in Frankfurt is down 2.5%, and the CAC 40 in Paris is down 2.2%.
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.
In energy markets, benchmark US crude lost $2.75 to $80.74 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 $2.63 to $86.90 a barrel in London. It rose 63 cents in the previous session to $90.46.
The dollar rose to 142.88 yen from 142.49 yen on Thursday. The euro fell to 97.60 cents from 98.31 cents.
On Thursday, the S&P 500 lost 0.8%, the Dow fell 0.4% and the Nasdaq Composite fell 1.4%.
MacDonald reported from Beijing; I reported OT from Washington