US consumer price inflation slowed slightly last month, jumping 8.3 percent compared to April 2021
London (AFP) - World equities tanked Thursday and the euro hit a five-year dollar low as slowing US inflation failed to dent fears of rising global interest rates.
Frankfurt, London and Paris stock markets each sank around two percent in afternoon deals after heavy falls in Asia.
Wall Street opened lower, with the Dow down 0.5 percent.
Panic-stricken investors also sent virtual unit bitcoin tumbling to the lowest level since late 2020 after a dramatic collapse in some stablecoin cryptocurrencies.
US inflation slowed to 8.3 percent in April after a four-decade peak of 8.5 percent in March, data showed overnight.
Oil prices dipped on demand concerns after the International Energy Agency said Thursday that Russia’s growing isolation will not create an “acute” global oil supply crunch.
- ‘Another cruel blow’ -
“While it will come as a relief that (US) inflation has finally peaked and the deceleration has started, the fact that it didn’t do so nearly as much as expected is just another cruel blow to households and the economy,” market analyst Craig Erlam at online trading platform OANDA told AFP.
“Central banks are going to have to do more if (inflation) data does not drastically improve in the next few months.”
Investors had hoped the US consumer price data would lower pressure on the Federal Reserve to hike borrowing costs.
However, April’s reading eclipsed market expectations of 8.1-percent inflation.
Interest rates are being hiked worldwide to tackle decades-high inflation, which is fuelled mostly by rocketing energy costs.
London’s stock market was slammed Thursday also by news that the UK economy shrank in March on fallout from soaring inflation, increasing the prospect of a recession – or two quarters of contraction in a row.
The data sent the pound sliding to a May 2020 low at $1.2166.
The euro hit a five-year dollar low at $1.0389 as the greenback was lifted by its haven status.
World markets have been volatile for much of 2022 owing to China’s Covid-19 lockdowns, Russia’s invasion of Ukraine, and as surging inflation weighed on consumer sentiment.
US President Joe Biden called April’s overall inflation slowdown “heartening”, but he acknowledged it was still a major challenge.
“Bringing it down is my top economic priority,” he said.
Cryptocurrency trading has also been dampening investor sentiment after two so-called stablecoins proved to be anything but. Supposedly pegged to the dollar, both TerraUSD and Tether saw the values collapse.
“The worry is that there will be a spillover to other risk assets like stocks, which could be treated as a source of funds to meet margin calls or which could simply be subjected to an exacerbation of the negative sentiment that has had a vice grip on the market for most of the year,” said market analyst Patrick O’Hare at Briefing.com.
Bitcoin slumped below $27,000, before recovering to stand down 5.1 percent at $28,371.92.
- Key figures at around 1330 GMT -
London - FTSE 100: DOWN 1.9 percent at 7,208.87 points
Frankfurt - DAX: DOWN 1.7 percent at 13,588.06
Paris - CAC 40: DOWN 2.0 percent at 6,142.29
EURO STOXX 50: DOWN 1.9 percent at 3,576.95
New York - Dow: DOWN 0.5 percent at 31,670.22
Hong Kong - Hang Seng Index: DOWN 2.2 percent at 19,380.34 (close)
Shanghai - Composite: DOWN 0.1 percent at 3,054.99 (close)
Tokyo - Nikkei 225: DOWN 1.8 percent at 25,748.72 (close)
Brent North Sea crude: DOWN 0.7 percent at $106.78 per barrel
West Texas Intermediate: DOWN 0.1 percent at $105.56 per barrel
Euro/dollar: DOWN at $1.0418 from $1.0513 at 2100 GMT Wednesday
Pound/dollar: DOWN at $1.2224 from $1.2251
Euro/pound: DOWN at 85.20 pence from 85.81 pence
Dollar/yen: DOWN at 128.06 yen from 129.97 yen