London (AFP) – Major global stock markets retreated Thursday following a weaker-than-forecast US economic outlook and despite the Federal Reserve trying to calm fears over President Donald Trump’s tariffs. After keeping rates on hold, Fed boss Jerome Powell on Wednesday suggested that any increase to consumer prices caused by tariffs would likely be short-lived, even as the central bank slashed its growth outlook and hiked inflation expectations. Wall Street rallied on his message Wednesday, but turned lower in after-hours trading and fell at the start of trading on Thursday.
The fall in Wall Street in pre-market trading dragged European indices even further lower, with Frankfurt’s DAX falling two percent at one moment. “The move shows that yesterday’s sharp rally across US markets in the wake of the FOMC’s Summary of Economic Projections and Fed Chair Jerome Powell’s press conference, was not a signal that all is well and that buyers can safely return to the markets,” said Trade Nation analyst David Morrison. The retreat by equity markets “appears to be an indication of the uncertainty overlaying the market as investors struggle with a variety of major geopolitical factors, along with the apparent random behaviour of the Trump administration,” he added.
Lingering tariff fears and geopolitical developments helped safe-haven gold to another record above $3,057.49 an ounce. European Central Bank chief Christine Lagarde warned Thursday a trade war between the United States and Europe could shave half a percentage point off eurozone growth and push up inflation. In other central bank action the Bank of England and Sweden’s Riksbank held interest rates steady Thursday, as did the Bank of Japan on Wednesday. Meanwhile, the Swiss central bank cut its rates on Thursday, citing “high uncertainty” in the global economy.
The price of copper reached a five-month high above $10,000 a tonne as US companies stock up on the metal targeted by Trump’s tariffs. Oil prices wobbled as investors weighed weak demand and a fresh upsurge in Gaza hostilities. Traders kept tabs also on eastern Europe after Trump told Ukraine’s President Volodymyr Zelensky that the United States could own and run his country’s nuclear power plants as part of his bid to secure a ceasefire with Russia.
Nevertheless, the main markets focus was on the United States, the world’s biggest economy. “Great uncertainty remains over the direction of travel for the US economy, with business activity likely to remain subdued until we see greater clarity over the trade relationships and potential pricing for US imports and exports,” noted Joshua Mahony, analyst at Scope Markets. Trump’s painful duties on imports into the United States and threats of further tariffs have stoked recession fears. Some observers have warned also that the president’s pledges to slash tax, regulation and immigration will reignite inflation could force the Fed to hike rates rather than cutting further.
The Fed on Wednesday said “uncertainty around the economic outlook has increased,” cutting its forecast for US growth this year to 1.7 percent from 2.1 percent estimated in December. It tipped core inflation to hit 2.8 percent as opposed to the 2.5 percent previously seen, but Powell said the increase would be “transitory.” However, Fed officials still see two rate cuts this year.
– Key figures around 1330 GMT –
New York – Dow: DOWN 0.6 percent at 41,712.97 points
New York – S&P: DOWN 0.7 percent at 5,635.47
New York – Nasdaq: DOWN 1.0 percent at 17,576.82
London – FTSE 100: DOWN 0.2 percent at 8,685.71
Paris – CAC 40: DOWN 1.2 percent at 8,076.88
Frankfurt – DAX: DOWN 1.7 percent at 22,895.23
Hong Kong – Hang Seng Index: DOWN 2.2 percent at 24,219.95 (close)
Shanghai – Composite: DOWN 0.5 percent at 3,408.95 (close)
Tokyo – Nikkei 225: Closed for a holiday
Euro/dollar: DOWN at $1.0825 from $1.0903 on Wednesday
Pound/dollar: DOWN at $1.2944 from $1.3002
Dollar/yen: DOWN at 148.53 yen from 148.71 yen
Euro/pound: DOWN at 83.62 pence from 83.82 pence
West Texas Intermediate: FLAT at $66.89 per barrel
Brent North Sea Crude: FLAT at $70.79 per barrel
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© 2024 AFP
