Stock markets fall as inflation rises and recession fears intensify

Stock markets fell in London and across Europe on Thursday as fears mounted that runaway price increases could soon cause a recession.

The FTSE 100 index of large-company chares fell 2 percent to 7,288.56 after inflation soared to a 40-year high and markets reacted to Wall Street’s worst day since the height of the pandemic.

The London Stock Exchange turned red as the sell-off accelerated and 96 of the top 100 stocks lost value. The pound fell slightly to $1.2375, down from $1.2394 yesterday’s close.

Germany’s DAX index also fell 2 percent, with France’s CAC 1.9 percent lower. In Asia, Hong Kong’s leading stock index fell 2.1 percent and Japan’s Nikkei lost 1.7 percent.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said disappointing results from US retailers had rattled markets.

“The drop was triggered by US retail giant Target’s warning that customers were already buying fewer big-ticket items, such as furniture and electronics, and that higher fuel prices and supply chain costs were also weighing on prices. Margins: Hot on the heels of Walmart.

“With consumers’ purchasing power expected to be further eroded by interest rate hikes, the concern is that Target’s pain is a harbinger of even more struggles to come for retailers.”

UK consumer confidence has been hit by gloomy news on the cost of living. Data on Wednesday showed UK inflation had risen to its highest annual rate since 1982 as energy bills soared.

Economists are increasingly concerned that a sharp slowdown in spending as shoppers tighten their belts will trigger a recession.

The Bank of England forecasts that the economy will contract in the final quarter of this year as households take a hit from a further large rise in energy bills.

Meanwhile, the disruption to food supply chains, combined with record fuel costs, is driving up the price of a grocery store.

Statistics from data company Experian Catalist show that the average cost of a liter of petrol at UK service stations on Wednesday was 168.2 pence.

That was an increase of 167.6 pence per liter on Tuesday. Diesel prices averaged 181.0 pence per liter on Wednesday, up from 180.9 pence the day before.

There was little sign of those pressures abating on Thursday when oil prices rose again. Brent crude rose 1.2 percent to $110.41 a barrel, while US crude rose 0.8 percent to $110.48 a barrel.

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