- FTSE 100 down 1.3%, with CAC 40 and DAX seeing steeper declines.
- Goldman Sachs warns the risk of a US recession has doubled.
- Brent crude prices fall 3% to $110 on recession fears.
Recession Fears Deepen
“Global sentiment has tipped further into negative territory. The pan-European Stoxx 600 is down 1.8%, with all sectors edging into negative ground. Germany’s DAX has seen a steeper decline of 2.3%, and the CAC 40 has shed almost 129 points. This contagion has likely been driven by the UK’s inflation data, with the CPI running at a 40-year high.
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There is a dawning realisation that global policy makers will have to act in a more aggressive manner in order to take the heat out of inflation. Swiftly rising interest rates act as a vacuum for economic growth, and this isn’t lost on the market today. There is also the unavoidable fact that Europe is more exposed to oil and gas supply chain constraints than the US and even the UK, making current conditions even more sensitive.
Broader concerns of a slowdown in global economic growth have seen oil and miners among the worst hit on the UK market today. BP plc (LON:BP) is down almost 3%, while mining and commodities trading giant Glencore has lost over 4%.
At the same time, the risk of the US entering a recession has doubled from 15% to 30%, according to Goldman Sachs. Again, this is related to an aggressive stance on interest rates, with rates being hiked by 0.75% recently – above and beyond what has previously been expected. Early indicators suggest the US market will open on a gloomy note today too.
Wider recession fears have seen brent crude fall 3% to $110 per barrel, which is still some way above the longer-term average, but a welcome trend for consumers. It’s unlikely this dip will be felt at the petrol pumps any time soon though, as broader supply chain concerns still exist in a very big way.
Ultimately, this is a darker day for global markets than has been seen in a while. Serious questions remain about the resilience of consumers, and it appears traders are bracing for a harsh hand where interest rates are concerned.”
Article by Sophie Lund-Yates, equity analyst at Hargreaves Lansdown
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