World

Stock markets around the world sank Thursday while the dollar rallied after the Federal Reserve warned US interest rates would go higher than previously expected in its fight against decades-high inflation.

Meanwhile the Bank of England warned that Britain faced a recession set to last until mid-2024.

The Fed on Wednesday unveiled a fourth straight 0.75-percentage-point increase as expected — the sixth hike this year to cool rampant prices.

The dollar rose strongly against the pound on Thursday despite the Bank of England also delivering a 0.75-percentage-point hike — the largest in 33 years — to 3.0 percent, or the highest rate since 2008.

The pound fell by two percent against the dollar in afternoon trading.

Norway’s central bank raised its policy rate for a fourth consecutive time, with a quarter-point increase that took it to its highest level since 2009 at 2.5 percent.

European Central Bank president Christine Lagarde flagged more interest rate hikes on Thursday with comments that a “mild” eurozone recession was looming but would not be enough to bring down record-high inflation.

Oil prices also fell heavily on Thursday as aggressive rate hikes increase expectations of a global recession.

Hong Kong led stock market losses as the city’s central bank hiked rates in line with the Fed, owing to their policy link via the dollar peg.

Traders gave back a chunk of the previous two days’ gains, which came on the back of speculation China was planning to roll back some of its painful zero-Covid policies.

Adding to the selling was confirmation from Beijing’s health authority that it intended to stick to the strategy.

– ‘Some ways to go’ –

“Stocks fell… after the Federal Reserve raised benchmark interest rates and warned that there was still some ways to go in its efforts to tame inflation,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Before the Fed announcement, stocks had rallied for more than a week on speculation the US central bank would indicate that its rate tightening could soon reach a peak as the world’s biggest economy showed signs of slowing.

Yet Fed chief Jerome Powell poured cold water on these hopes for a “pivot” in policy, telling a news conference that “incoming data since our last meeting suggests that ultimate level of interest rates will be higher than previously expected”.

He added that “we still have some ways” until borrowing costs were at the necessary level and that it “is very premature to be thinking about pausing”.

Briefing.com analyst Patrick O’Hare said that for investors “the point that registered was (Powell’s) view that it is very premature to talk about pausing the rate hikes”.

Another key point was that “the Fed still has a ways to go to get the policy rate to a restrictive level that is sufficient for getting inflation back down to the 2.0 percent target,” O’Hare noted.

Moreover, Powell indicated “that the Fed’s terminal rate is apt to be higher than previously expected and is likely to be held there longer than previously expected,” which upended previous market expectations.

Investors now expect Fed rates to top out at more than five percent, compared with four percent previously.

Global equities have slumped this year on mounting fears that rising borrowing costs will curtail consumer and business spending and spark a global recession.

“The Federal Reserve… didn’t offer any real crumbs of comfort for traders or indeed the global economy when it came to how rapidly the now relentless — and potentially damaging — run of rate hikes may conclude,” said Scope Markets analyst James Hughes.

– Key figures around 1330 GMT –

London – FTSE 100: DOWN 0.5 percent at 7,110.98 points

Frankfurt – DAX: DOWN 1.6 percent at 13,040.32

Paris – CAC 40: DOWN 1.3 percent at 6,196.72

EURO STOXX 50: DOWN 1.5 percent at 3,566.85

New York – Dow: DOWN 0.8 percent at 31,893.44

Hong Kong – Hang Seng Index: DOWN 3.1 percent at 15,339.49 (close)

Shanghai – Composite: DOWN 0.2 percent at 2,997.81 (close)

Tokyo – Nikkei 225: Closed for a holiday

Pound/dollar: DOWN at $1.1174 from $1.1390 Wednesday

Euro/dollar: DOWN at $0.9753 from $0.9816

Dollar/yen: UP at 148.15 yen from 147.90 yen

Euro/pound: UP at 87.24 pence from 86.17 pence

Brent North Sea crude: DOWN 1.5 percent at $94.73 per barrel

West Texas Intermediate: DOWN 1.9 percent at $88.26 per barrel

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The Bank of England on Thursday announced its biggest interest rate hike since 1989 to combat sky-high inflation that it warned was pushing Britain into a recession set to last until mid-2024.

Following a regular meeting, the BoE said it was lifting borrowing costs by 0.75 percentage points to three percent — the highest level since the 2008 global financial crisis — to cool UK inflation that it sees shortly peaking at a four-decade high near 11 percent.

“It is a tough road ahead,” BoE governor Andrew Bailey told a press conference.

“The sharp increase in energy prices caused by Russia’s invasion of Ukraine has made us poorer as a nation. The level of economic activity is likely to be flat and even fall for some time,” he warned.

The latest rate increase mirrors aggressive rate-tightening by central banks worldwide as food prices and energy bills soar.

On Wednesday, the US Federal Reserve sprang a fourth consecutive hike of 0.75 percentage points — and its boss Jerome Powell suggested they would go higher than expected.

The BoE said British inflation would peak at 10.9 percent this year, but with the level so high, analysts said the central bank rate could hit as high as five percent in the coming months.

– ‘Prolonged recession’ –

Minutes of its meeting warned of a “challenging outlook for the UK economy” that was “expected to be in recession for a prolonged period”, dealing a blow to Britain’s troubled government.

The BoE said the economy had shrunk since the third quarter, entering a technical recession that is forecast to last until the first half of 2024.

The pound tumbled two percent against the dollar on expectations of a long-lasting recession.

“A typical textbook trade is out of the window because currencies usually move higher when a central bank increases rates,” noted Naeem Aslam, chief market analyst at Avatrade.

“Tough times are ahead, and we are going to see the economy, markets, and the currency tanking in the coming months.”

London’s FTSE 100 shares index fared better, losing about half-a-percent.

– Cost-of-living crisis –

The BoE rate increase is set to worsen a cost-of-living crisis for millions of Britons as hikes by central banks see retail lenders push up interest rates on their own loans.

“The central bank has had the unenviable job of fighting soaring inflation amid enormous economic and political uncertainty,” said Craig Erlam, analyst at trading platform OANDA.

Repayments on UK mortgages have surged in recent weeks also after the debt-fuelled budget of previous British prime minister Liz Truss spooked markets, forcing her to resign and triggering emergency buying of UK government bonds by the BoE.

Her successor Rishi Sunak has attempted to bring calm to markets by hinting at tax rises in a fresh budget on November 17, even if such a move further harms Britain’s economy.

“I think everyone knows we do face a challenging economic outlook and difficult decisions will need to be made,” Sunak, a former UK finance minister, told parliament on Wednesday.

British annual inflation stands at 10.1 percent, the highest level in 40 years.

As the Covid-19 pandemic began in early 2020, the BoE slashed its key interest rate to a record-low 0.1 percent and also pumped massive sums of new cash into the economy.

The Bank of England started raising rates last December, while Thursday’s hike was the eighth increase in a row.

“Importantly, most of the tightening in policy over the past year was yet to feed through to the real economy,” said the BoE minutes.

British schoolgirl Lowri Moore is just 13 but has achieved a lot in her short life, championing children who like her wear glasses.

Aged nine, she persuaded Disney to create a bespectacled heroine for the first time, in the hit film “Encanto”.

Her #GlassesOn campaign has meanwhile struck a chord with thousands of young people and their parents around the world.

Now she has another US giant in her sights.

The teenager from Nottinghamshire, central England, is urging the body responsible for all new emojis to give people the option to put glasses on them.

She says many people believe that children being stigmatised for wearing glasses is a thing of the past.

But she argues many children still resist wearing their glasses for fear of appearing “different or uncool”.

Research shows children with spectacles are over 35 percent more likely to be bullied at school, and not wearing them can have far-reaching consequences.

“We are in touch with a professor who works in Botswana to give children glasses and he said that most of the children that get glasses don’t want to wear them for fear of being different and not cool,” Lowri told AFP.

– ‘Biggest fan’ –

She said that without glasses you need, “you won’t be able to learn and that will limit your job options and you will probably really struggle in life all because you didn’t wear your glasses. That’s not fair.”

Lowri’s latest campaign was sparked when her mother Cyrilyn tried to find an emoji relevant to her daughter.

“She was looking for an emoji that would represent me but all she found was a nerd.

“She kept on looking and there was a granny and a teacher but obviously that doesn’t represent me,” she said.

Lowri said it was great there were some bespectacled emojis, but three was not enough.

“It’s not really positive so we’re just asking for the option of putting glasses onto already existing emojis,” she said after handing in copies of her letter at the London offices of tech giants Google and Meta on Wednesday.

Lowri’s campaigning began in 2019 when she wrote to Disney calling for more characters with glasses in their films.

Two years later, the “Encanto” character Mirabel Madrigal hit the big screen.

Director Jared Bush revealed he had been inspired by the schoolgirl’s letter, telling her: “I am your biggest fan, I’m so impressed by you.”

The director also said he had wanted to let her know much earlier, but had to keep it secret until the movie was in the bag.

– ‘Negative stereotypes’ –

In her latest letter, Lowri praised the Unicode Consortium, the non-profit organisation based in California that oversees new emojis, for offering users more choice.

But she urged them to go further.

“I’d love to see the option to add glasses to face emojis, similar to changing skin colour or hair colour as you have already made available,” she wrote.

Having the current “nerd” emoji as the only one available for young people could be “damaging as it helps to confirm the negative stereotype and stigma that we are trying hard to destroy”, she added.

Lowri’s campaigning success was recognised earlier this year when she was named “Campaigner of the Year” by the International Agency for the Prevention of Blindness (IAPB).

Failing to wear glasses can prevent children’s eyes from developing normally and lead to avoidable eye conditions.

Jessica Thompson of the IAPB, which works in over 100 countries worldwide, said Lowri’s advocacy was helping to highlight the damage to children’s futures of not wearing glasses.

“If you struggle to see, you struggle to learn,” she told AFP.

Wearing glasses was the single “most effective” health intervention for schoolchildren, “reducing the odds of failing a class by 44 percent”, she added.

The Bank of England delivered Thursday its biggest interest rate hike since 1989 to combat soaring inflation and warned that Britain faced a recession set to last until mid-2024.

Britain’s economy has entered a recession set to last until mid-2024, the Bank of England said Thursday as it hiked its key interest rate by the biggest amount since 1989.

Following a regular meeting, the BoE said it was lifting borrowing costs by 0.75 percentage points to three percent — the highest level since the 2008 global financial crisis — with UK inflation at a four-decade high above 10 percent.

The latest rate hike mirrors aggressive rate-tightening by central banks worldwide as economies battle the highest prices in decades.

On Wednesday, the US Federal Reserve sprang a fourth consecutive hike of 0.75 percentage points — and its boss Jerome Powell suggested they would go higher than expected.

The BoE said British inflation would peak at 10.9 percent this year.

Minutes of its meeting said the economy was “likely to be entering recession”. 

They added: “Importantly, most of the tightening in policy over the past year was yet to feed through to the real economy.”

– Cost-of-living crisis –

The BoE rate increase is set to worsen a cost-of-living crisis for millions of Britons as hikes by central banks see retail lenders push up interest rates on their own loans.

“The central bank has had the unenviable job of fighting soaring inflation amid enormous economic and political uncertainty,” said Craig Erlam, analyst at trading platform OANDA.

Repayments on UK mortgages have surged in recent weeks also after the debt-fuelled budget of previous British prime minister Liz Truss spooked markets, forcing her to resign and triggering emergency buying of UK government bonds by the BoE.

Her successor Rishi Sunak has attempted to bring calm to markets by hinting at tax rises in a fresh budget on November 17, even if such a move further harms Britain’s economy.

“I think everyone knows we do face a challenging economic outlook and difficult decisions will need to be made,” Sunak, a former UK finance minister, told parliament on Wednesday.

British annual inflation stands at 10.1 percent, the highest level in 40 years, on soaring food prices and energy bills.

As the Covid-19 pandemic began in early 2020, the BoE slashed its key interest rate to a record-low 0.1 percent and also pumped massive sums of new cash into the economy.

The Bank of England started raising rates last December and Thursday’s hike was the eighth increase in a row.

Europe must act immediately to prevent a shortage of natural gas next year as Russia slashes deliveries in the wake of the Ukraine war, the International Energy Agency warned Thursday.

The IEA said the shortfall would occur if Russia stops pipelines deliveries completely and China steps up its imports of liquefied natural gas, which Europe has relied upon to replace Russian supplies.

The region could lack 30 billion cubic metres that it needs “to fuel its economy and sufficiently refill storage sites during the summer of 2023, jeopardising its preparations for the winter of 2023-24,” the Paris-based agency said in a report.

Russia drastically cut supplies to Europe in suspected retaliation against Western sanctions over its invasion of Ukraine, but the region was able to fill storage sites for this upcoming winter.

Moscow delivered 60 billion cubic metres of gas to Europe this year, but the IEA said that it is “highly unlikely” that Russia will provide the same amount in 2023 and could cease deliveries entirely.

And while Chinese LNG imports were lower in the first 10 months of this year, the world’s second biggest economy could grab 85 percent of the expected increase in global LNG supplies if its purchases recover next year.

“With the recent mild weather and lower gas prices, there is a danger of complacency creeping into the conversation around Europe’s gas supplies, but we are by no means out of the woods yet,” IEA Executive Director Fatih Birol said in a statement.

Birol warned that Europe will face “an even sterner challenge” next winter.

“This is why governments need to be taking immediate action to speed up improvements in energy efficiency and accelerate the deployment of renewables and heat pumps — and other steps to structurally reduce gas demand,” he said.

Birol told reporters that Europe’s gas storage sites may only be 65 percent full in 2023, compared to 95 percent this year.

Asian and European stock markets sank and the dollar rallied Thursday after the Federal Reserve warned US interest rates would go higher than previously expected in its fight against decades-high inflation.

The Fed on Wednesday unveiled a fourth straight 0.75-percentage-point increase as expected — the sixth hike this year to cool rampant prices.

The dollar on Thursday rose strongly against main rival including the pound and as the Bank of England was set to deliver its own bumper interest-rate hike in a decision due at 1200 GMT. 

The BoE is tipped to lift its key rate by 0.75 percentage points to three percent — the most in 33 years and putting British borrowing costs at the highest level since 2008.

Norway’s central bank raised its policy rate for a fourth consecutive time, with a quarter-point increase that took it to its highest level since 2009 at 2.5 percent.

Oil prices also fell heavily on Thursday as aggressive rate hikes increase expectations of a global recession.

Hong Kong led stock market losses as the city’s central bank hiked rates in line with the Fed, owing to their policy link via the dollar peg.

Traders gave back a chunk of the previous two days’ gains, which came on the back of speculation China was planning to roll back some of its painful zero-Covid policies.

Adding to the selling was confirmation from Beijing’s health authority that it intended to stick to the strategy.

– ‘Some way to go’ –

“Stocks fell… after the Federal Reserve raised benchmark interest rates and warned that there was still some ways to go in its efforts to tame inflation,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Before the Fed announcement, stocks had rallied for more than a week on speculation the US central bank would indicate that its rate tightening could soon reach a peak as the world’s biggest economy showed signs of slowing.

Yet Powell poured cold water on those hopes, telling a news conference that “incoming data since our last meeting suggests that ultimate level of interest rates will be higher than previously expected”.

He added that “we still have some ways” until borrowing costs were at the necessary level and that it “is very premature to be thinking about pausing”.

Investors now expect Fed rates to top out at more than five percent, compared with four percent previously.

Global equities have slumped this year on mounting fears that rising borrowing costs will curtail consumer and business spending and spark a global recession.

“The Federal Reserve… didn’t offer any real crumbs of comfort for traders or indeed the global economy when it came to how rapidly the now relentless — and potentially damaging — run of rate hikes may conclude,” said Scope Markets analyst James Hughes.

– Key figures around 1030 GMT –

London – FTSE 100: DOWN 0.4 percent at 7,113.98 points

Frankfurt – DAX: DOWN 0.8 percent at 13,156.90

Paris – CAC 40: DOWN 0.6 percent at 6,238.31

EURO STOXX 50: DOWN 0.8 percent at 3,593.41

Hong Kong – Hang Seng Index: DOWN 3.1 percent at 15,339.49 (close)

Shanghai – Composite: DOWN 0.2 percent at 2,997.81 (close)

Tokyo – Nikkei 225: Closed for a holiday

New York – Dow: DOWN 1.6 percent at 32,147.76 (close)

Pound/dollar: DOWN at $1.1258 from $1.1390 Wednesday

Euro/dollar: DOWN at $0.9754 from $0.9816 

Dollar/yen: UP at 148.16 yen from 147.90 yen

Euro/pound: UP at 86.64 pence from 86.17 pence

Brent North Sea crude: DOWN 1.4 percent at $94.80 per barrel

West Texas Intermediate: DOWN 1.8 percent at $88.40 per barrel