Markets have been on edge over central bank plans to hike interest rates
Stock markets mostly tumbled again on Tuesday, extending losses that were sparked by last week’s Federal Reserve warning that more monetary tightening was on the way.
London’s FTSE 100 ended down after a public holiday closure the day before, while the Paris CAC 40 fell after staging a rally earlier in the day.
Wall Street indices started the morning in the green, only for the rebound to fizzle and dash analyst predictions of “Turnaround Tuesday”.
“US stocks turned negative after confidence and job opening data supported the argument for the Fed to stick to an aggressive stance with fighting inflation,” said Edward Moya, analyst at OANDA trading platform.
“Turnaround Tuesday disappeared faster than dessert does at the Moya household.”
The Frankfurt DAX bucked the trend to end the day up 0.5 percent.
Most markets have been slumping since Friday after Federal Reserve chief Jerome Powell warned of more interest rate hikes to fight runaway four-decade high inflation, even at the cost of economic pain.
A closely-watched US survey found Americans consumers to be happier about the state of the economy than expected, and more willing to spend.
The strong data will boost the idea that the US economy does not need extra help from the Fed, said Ipek Ozkardeskaya, Swissquote Bank analyst.
“Cherry on top: the consumer sentiment regarding the future is improving,” she added.
“Hence, there is no reason for the Fed to soften its stance.”
– Energy woes –
Central banks are scrambling worldwide to tame consumer prices that have surged higher since Russia invaded Ukraine in late February.
German inflation data showed consumer prices rose by 7.9 percent in the year to August as the ongoing energy crisis further stoked price pressures.
In Spain, the inflation rate slowed to 10.4 percent in August as fuel prices eased, but it remained elevated due to rising electricity and food prices.
The European Central Bank — which raised interest rates for the first time in over a decade in July — is expected to hike them again when it meets next week.
Energy prices retreated on Tuesday, however, with oil contracts tanking on fears about a major hit to demand from any global economic slowdown — and more Covid restrictions in key consumer market China.
Brent North Sea crude dipped below $100 per barrel.
Natural gas prices, which have soared this year over supply disruptions from key producer Russia, dipped in Europe as German Chancellor Olaf Scholz said government measures have left his country better prepared to cope with further delivery cuts in the winter.
Many European countries are facing severe supply problems as Moscow turns off the gas taps in response to EU military and diplomatic backing for Ukraine.
Russian energy giant Gazprom plans to suspend gas deliveries through the Nord Stream pipeline, which runs to Germany, for three days of “maintenance” work from Wednesday.
Elsewhere, Asian stocks indices diverged on Tuesday, winning limited support from bargain-buying.
A record 96 percent on-year drop in earnings from China’s largest developer Country Garden Holdings served as a grim reminder of the country’s beleaguered property sector.
Investors are also anxious about “flaring geopolitical tensions”, said Naeem Aslam of AvaTrade, especially as Taiwan and Beijing exchanged angry barbs over Chinese drone incursions at an outlying Taiwanese island.
– Key figures at around 1545 GMT –
London – FTSE 100: DOWN 0.9 percent at 7,361.63 points (close)
Frankfurt – DAX: UP 0.5 percent at 12,961.14 (close)
Paris – CAC 40: DOWN 0.2 percent at 6,210.22 (close)
EURO STOXX 50: DOWN 0.2 percent at 3,561.92
New York – Dow: DOWN 0.8 percent at 31,838.l29
Tokyo – Nikkei 225: UP 1.1 percent at 28,195.58 (close)
Hong Kong – Hang Seng Index: DOWN 0.4 percent at 19,949.03 (close)
Shanghai – Composite: DOWN 0.4 percent at 3,227.22 (close)
Euro/dollar: UP at $0.9993 from $0.9972 on Monday
Pound/dollar: DOWN at $1.1636 from $1.1709
Euro/pound: UP at 85.89 pence from 85.38 pence
Dollar/yen: UP at 138.93 yen from 138.68 yen
West Texas Intermediate: DOWN 5.39 percent at $91.80 per barrel
Brent North Sea crude: DOWN 4.87 percent at $97.93 per barrel
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