Stocks fluctuate as oil prices fall on recession fears

Stock markets fluctuated and oil prices fell on Friday on growing fears that raising interest rates by central banks to fight inflation could trigger a recession.

Investors were shocked this week after the US Federal Reserve unleashed the biggest increase in borrowing costs in almost 30 years to deal with runaway consumer prices.

People walk past the New York Stock Exchange in New York on June 16, 2022. (Photo by Yuki IWAMURA/AFP)

This was followed by the fifth consecutive rate hike by the Bank of England and the first rate hike in 15 years by the Swiss Central Bank, highlighting growing global concerns about inflation.

The moves sparked a global sell-off on Thursday. The US and European markets tried to recover on Friday, but some indices returned to negative territory later in the day.

On Wall Street, the Dow Industrial Average fell below 30,000 by midday, while the broad-based S&P 500 remained flat and the high-tech Nasdaq rose one percent.

European markets fluctuated, with London closing lower, Paris almost unchanged and Frankfurt closing higher.

“Mood has faltered and stocks could take even more damage,” Craig Erlam, an analyst at online trading platform OANDA, told AFP.

Sentiment worsened again as US official data showed industrial production rose just 0.2 percent in May, much slower than in April and weaker than expected.

“We are seeing positive attempts quickly eroded as market prices are at higher risk of recession as inflation continues unabated,” Ipek Ozkardeskaya, an analyst at Swissquote Bank, told AFP.

Asian stock markets mostly closed lower on Friday.

Recession worries also gripped the oil market, as US benchmark WTI fell 5.6 percent to $108.83 a barrel. International benchmark Brent North Sea Crude fell nearly 5% to $114.08.

Energy prices have surged since Russia invaded Ukraine, pushing up inflation, prompting central banks to take action.

– Bank of Japan resists the trend –

Investors fear that while a rate hike could help curb inflation, it could have the negative side effect of dampening economic growth.

On Friday, however, the Bank of Japan bucked the global trend by backing its decision not to raise rates, pushing the yen to its lowest level against the dollar since 1998.

Officials in Tokyo insist that low rates are still needed to support the struggling economy, although the Bank of Japan said “due attention must be paid to the development of financial and foreign exchange markets.”

Stock markets have been falling for months as traders speculate about the end of an era of cheap money that has propelled stock prices to record or multi-year highs.

Inflation around the world is at levels not seen for decades, in part due to spikes in energy and food prices.

– Key numbers around 15:10 GMT –

New York – Dow: DOWN 0.2 percent to 29,867.12.

London – FTSE 100: DOWN 0.4% to 7,016.25.

Frankfurt – DAX: up 0.7% to 13,126.26.

Paris – CAC 40: DOWN 0.1% to 5882.65.

EURO STOXX 50: up 0.3% to 3438.46.

Tokyo – Nikkei 225: DOWN 1.8% to 25,963.00 (close)

Hong Kong – Hang Seng Index: up 1.1% to 21,075.00 (close)

Shanghai – Composite: up 1.0% to 3316.79 (close)

EUR/USD: DOWN to $1.0469 from $1.0549 Thursday evening

Pound/dollar: DOWN $1.2208 from $1.2353

Euro/pound: up 85.77p from 85.41p.

Dollar/yen: up 135.07 yen from 132.21 yen

Brent North Sea Oil: DECLINE 4.8% to $114.08 a barrel

West Texas Intermediate: DOWN 5.6% to $108.83.

burs-lt / har