Wall Street headed for another day of losses early Friday after further rate hikes by the Federal Reserve and other central banks fueled fears of a possible global recession and pushed oil prices to their lowest levels since the opening days of 2022.
Futures on the Dow Jones Industrial Average fell 1.1% and futures on the S&P 500 fell 1.2%. Barring a wild bout, major US indices are poised to end the week in losses for the fourth time in five weeks.
Oil prices fell 3% and threatened to fall below $80 a barrel for the first time since early January.
Central banks in Britain, Switzerland, Turkey and the Philippines all hiked interest rates after the Fed raised interest rates for the fifth time this year and announced more hikes on Wednesday.
“Global equities are struggling as the world assumes that rising interest rates will trigger a much earlier and potentially severe global recession,” Oanda’s Edward Moya said in a report.
Britain’s new government on Friday announced a sweeping plan of tax cuts that it said would be funded by borrowing and revenue from expected growth, taking the pound below $1.12 for the first time since 1985.
Economists have expressed concerns the government’s policies will lead to a sharp rise in borrowing and undermine confidence in the UK economy.
Also on Friday, Vietnam’s central bank hiked interest rates by a full percentage point, surprising forecasters. The State Bank of Vietnam appeared to be trying to dampen inflation while preventing capital outflows in search of higher interest rates abroad.
Investors fear central banks may be willing to tolerate a painful economic downturn in order to get prices under control.
Some are suggesting the US economy is slowing as the Fed is supported to back off plans for further rate hikes. However, Chair Jerome Powell said interest rates will remain elevated for an extended period on Wednesday if that is needed to bring inflation back to its 2% target.
US consumer inflation fell to 8.3% in August from a peak of 9.1% in the previous month. But core inflation, which excludes volatile food and energy prices to give a clearer picture of the trend, rose to 0.6% mom from July’s 0.3% rise. The indicated price pressure was still strong.
The Fed raised interest rates, which affect many consumer and business loans, to a range of 3% to 3.25% on Wednesday. It released a forecast showing the key interest rate to end the year at 4.4%, a full point higher than forecast in June.
At midday in Europe, the FTSE 100 in London slipped 2.1%, the DAX in Frankfurt 2.5% and the CAC 40 in Paris 2.2% lower.
In Asia, the Shanghai Composite Index slipped 0.7% to 3,088.36 and Hong Kong’s Hang Seng fell 1.1% to 17,953.50. Seoul’s kospi fell 1.8% to 2,290.00.
Sydney’s S&P-ASX 200 was down 1.9% to 6,574.70 and India’s Sensex was down 1.5% to 58,231.49. The New Zealand and Southeast Asian markets declined.
In energy markets, benchmark US crude slipped $2.75 to $80.74 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 55 cents on Thursday to $83.49. Brent crude, used to price international oils, fell $2.63 to $86.90 a barrel in London. In the previous session, it rose 63 cents to $90.46.
The dollar rose to 142.88 yen from 142.49 yen on Thursday. The euro fell from 98.31 cents to 97.60 cents.
On Thursday, the S&P 500 lost 0.8%, the Dow 0.4% and the Nasdaq Composite 1.4%.
McDonald reported from Beijing; Ott reported from Washington