Closing summary
Global finance leaders should prepare for multiple inflationary shocks, the head of the International Monetary Fund has warned, as fears of a global economic downturn continue to hit markets around the world.
The IMF’s managing director, Kristalina Georgieva, said it is becoming harder for central banks to bring down inflation without causing recessions.
Speaking to Reuters at the sidelines of a meeting of G7 finance ministers and central bank chiefs in Germany, Georgieva cited mounting pressures on energy and food prices from Russia’s war in Ukraine, and the supply chain disruption and cost pressures caused by China’s zero-Covid policies.
“I think what we need to start getting more comfortable with is, that may not be the last shock,” Georgieva said, adding that the Omicron outbreak last year had shown that inflation would not be a “transitory” one time shock.
London stock markets tumbled into the red on Thursday, with blue chip shares on track for its biggest one-day drop in two months. The FTSE 100 index is down 163 points or 2% in afternoon trading at 7274 points.
The pan-European Stoxx 600 index is down 1.3% with personal care companies, food and beverage companies, tech stocks and retailers all weakening.
Wall Street has opened lower, a day after its worst selloff in nearly two years. as major retailers reported that rising inflation was hitting consumer spending and eating into their profit margins.
The Dow Jones industrial average is down 335 points, or 1%, at 31,154, on top of Wednesday’s 3.6% slump.
Department store chain Kohl’s slashed its profit and sales outlook, echoing Target and Walmart earlier this week.
“The year has started out below our expectations,” said Michelle Gass, Kohl’s chief executive officer, adding that:
“sales considerably weakened in April as we encountered macro headwinds related to lapping last year’s stimulus and an inflationary consumer environment.”
US jobless claims rose for the third week in a row, with 218,000 Americans seeking unemployment support last week. A survey of manufacturers in the Philadelphia region showed that growth almost stalled this month, as rising costs hit factories.
Fiona Cincotta, senior financial markets analyst at City Index.
“The reality is no matter which way your turn, warnings signs are flashing.”
Inflation hit confidence at UK factories too, where investment plans remain weak, according to the CBI’s latest industrial trends reports. The number of manufacturers planning to lift their own prices remained near a record high.
Sri Lanka has defaulted for the first time since independence in 1948, as its economic crisis deepens and inflation surges higher.
Sri Lanka’s central bank confirmed today it had missed a deadline for $78m of foreign debt repayments on two sovereign bonds, as a 30-day grace period expired.
In other news....
Unions have called on the government to take urgent action to fix a “whopping pensions gap”, as research showed women working in many industries have half the retirement savings of men.
The chief executive of National Grid has weighed into the row over whether to introduce a windfall tax on North Sea oil and gas producers, claiming it would hit investment in renewables and harm customers.
Royal Mail has warned that it is likely to raise prices again for stamps and letters, as part of efforts to combat rising costs and offset a post-pandemic slowdown in parcel deliveries. Shares have fallen over 12%, after it missed profit forecasts.
A battle is shaping up between major retailers over whether the UK should introduce an online sales tax, with Sainsbury’s demanding it to help revive struggling high streets while M&S argues it would have the opposite effect.
Amazon has invested more than £1bn on TV, movie and live sport content in the UK in recent years and plans to increase spending to make it a must-have streaming service for cash-strapped households.
EasyJet has said it was heading for summer with “strong momentum and optimism”, flying at near pre-pandemic capacity in peak season as the lifting of Covid restrictions helped the airline narrow its half-year losses and look to a return to profit.
An umbrella created as part of a collaboration between Gucci and Adidas has met with a storm of criticism in China, where social media users have derided the fact it fails to keep its owner dry.
Four businesses have told us how inflation is hurting their operations:
Wall Street has opened a little lower after its worst day in two years, as fears over the economic outlook loom over the markets.
The Dow Jones industrial average is down 214 points, or 0.7%, at 31,275 points, after a 3.6% tumble on Wednesday.
The broader S&P 500 index has dropped by 0.35%, while the tech-focused Nasdaq Composite index is flat.
Stocks opened lower Thursday, extending losses after the Dow Jones Industrial Average and S&P 500 a day after they saw their biggest one-day drops since June 2020. https://t.co/9fyBZjymOY pic.twitter.com/ALWoJjGHS7
— MarketWatch (@MarketWatch) May 19, 2022
