Stocks Tank As Central Banks Hike Rates

Pedestrians stand in front of an electronic share price board showing the numbers of the Tokyo Stock Exchange in Tokyo on 14 June, 2022. (AFP Photo)

Stock markets sank Thursday as more central banks hiked interest rates in efforts to tame runaway inflation, actions that raised fears they could spark recessions.

One day after the Federal Reserve's (Fed) biggest United States (US) interest-rate hike in nearly 30 years, the Bank of England (BoE) raised borrowing costs to their highest level since the 2009 financial crisis.

The BoE jacked up its rate by a quarter-point to 1.25 percent, its fifth straight increase, but it was lower than the Fed's more aggressive 0.75-percentage-point increase.

Adding to the sense of urgency, the Swiss National Bank (SNB) surprised the markets as it unexpectedly hiked rates for the first time since 2007.

The European Central Bank (ECB) plans to hike rates next month for the first time in a decade.

"European bourses are tanking on recession fears as central banks act aggressively to tame inflation," City Index analyst Fiona Cincotta told AFP.

"While the move by the Fed was priced in, the SNB's hike was a shock that caught investors off guard. Harder and faster rate hikes from central banks mean that a recession will be hard to avoid."

European stock markets closed at their lowest level in three months, with London and Frankfurt shedding more than three percent and Paris falling by 2.4 percent.

Wall Street, which had rallied following the Fed's rate hike on Wednesday, fell sharply on Thursday.

The tech-heavy Nasdaq sank by four percent in midday trading while the broad-based S&P 500 was off by 3.2 percent and the Dow fell 2.4 percent.

Asian markets mostly closed lower.

Markets have been pummelled this year as investors fret over consumer prices, which have soared as Russia's invasion of Ukraine sent energy and food prices through the roof.

That has intensified fear that the world economy, which is still in recovery from the deadly COVID pandemic, could lurch back into a lengthy downturn.

While rate hikes are necessary to bring down inflation, investors worry that overly aggressive action by central banks could further hurt the global economic recovery and even spark recessions.

"Equity markets are experiencing another day of pain on Thursday as central banks continue to signal a willingness to sacrifice the economy in order to get inflation under control," said Craig Erlam, analyst at OANDA online trading platform.

Oil prices, meanwhile, stabilised after losses due to demand worries caused by new COVID containment measures in China and news of surging US production.

Key Figures At Around 1400 GMT 

New York - Dow: DOWN 2.4 percent at 29,935.59 points

London - FTSE 100: DOWN 3.1 percent at 7,044.98 (close)

Frankfurt - DAX: DOWN 3.3 percent at 13,038.49 (close)

Paris - CAC 40: DOWN 2.4 percent at 5,886.24 (close)

EURO STOXX 50: DOWN 3.0 percent at 3,427.91

Tokyo - Nikkei 225: UP 0.4 percent at 26,431.20 (close)

Hong Kong - Hang Seng Index: DOWN 2.2 percent at 20,845.53 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,285.38 (close)

Euro/dollar: UP at US$1.0495 from US$1.0444 late Wednesday

Pound/dollar: UP at US$1.2280 from US$1.2180

Euro/pound: DOWN at 85.48 pence from 85.75 pence

Dollar/yen: DOWN at 132.60 yen from 133.84 yen

Brent North Sea crude: DOWN 0.3 percent at US$118.13 per barrel

West Texas Intermediate: UP 0.2 percent at US$115.56